A Company Undertakes a 5-Year Project That Requires Annual Payments

question 11

Multiple Choice

A company undertakes a 5-year project that requires annual payments. Payment for the first year is It will then increase by 5% each subsequent year. The interest is fixed at 5% a year. What is the present worth of this cash flow?

• A)$9 112
• B)$9 328
• C)$9 442
• D)$9 524
• E)$10 226

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Definitions:

Standard Price

A predetermined cost serving as a benchmark for the valuation of goods and services in accounting and budgeting.

Unfavorable Cost Variance

A situation where actual costs exceed standard or planned costs, indicating inefficiencies or increased expense.

Standard Cost

A pre-determined estimate of the cost to produce or acquire a single unit of product or service, used for budgeting and measuring performance.

Direct Materials Quantity Variance

The difference between the actual quantity of materials used in production and the standard quantity expected, multiplied by the standard cost per unit.