What's the Present Value of a 4-Year Ordinary Annuity of $2,250

question 106

Multiple Choice

What's the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $3,000 at the end of Year 4 if the interest rate is 5%?

• A) $8,509
• B) $8,957
• C) $9,428
• D) $9,924
• E) $10,446

---

Definitions:

Margin of Safety

The difference between actual sales and break-even sales, indicating the extent to which sales can drop before losses occur.

Variable Costs

Costs that vary directly with the level of production or volume of output.

Fixed Costs

Expenses that do not change in proportion to the level of production or sales activity within a certain range.

Plantwide Overhead Rate

A single rate used to allocate all of a plant's manufacturing overhead costs to its production activities based on a uniform cost-driver.