Which One of the Following Would Have the Greatest Present

question 121

Multiple Choice

Which one of the following would have the greatest present value, assuming a positive discount rate?

• A) $1,000 today plus $100 a month for 2 years.
• B) $1,000 today plus $200 a month for a year.
• C) $1,000 today plus $400 a month for six months.
• D) $2,200 today plus $200 a month for six months.
• E) $2,200 today plus $100 a month for a year.

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Definitions:

Cost-Cutting

The process of reducing operating expenses within a business to improve profitability.

Revenue-Generating

Activities or endeavors that result in the inflow of money to an organization, typically from the sale of goods or services.

Opportunity Cost

The expenditure of bypassing the closest optimal alternative in the decision-making process.

Incremental Cash Flows

The additional cash inflows or outflows expected from a new project or investment, compared to not undertaking the project.