Use the Formula for the General Term (The Nth Term)

question 88

Multiple Choice

Use the formula for the general term (the nth term) of a geometric sequence to find the indicated term of the sequence with the given first term, a1, and common ratio, r.
-Find a8 when a1 = 2,000,000, r = 0.1.

• A) 0.002
• B) 2
• C) 0.02
• D) 0.2

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Definitions:

Discounted Cash Flow Method

A valuation technique that estimates the value of an investment based on its expected future cash flows, adjusted for time value of money.

Net Present Value Method

A method used in capital budgeting to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Time Value of Money Concept

The principle that a dollar today is worth more than a dollar in the future due to its potential earning capacity.

Capital Investment Analysis

The process of evaluating and comparing potential investments or projects based on their expected returns and risks to choose the most beneficial.