A Payment Stream Consists of Three Payments: $1000 Today, $1500

question 171

Short Answer

A payment stream consists of three payments: $1000 today, $1500 in 70 days, and $2000 in 210 days. What single payment, 60 days from now, is economically equivalent to the payment stream if money can be invested at a rate of 8.5%?

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Definitions:

Cash Conversion Cycle

A metric that evaluates how long it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

Expense Allocation

The process of distributing costs among different departments, projects, or accounts, based on their usage or benefit from the services.

Maintenance Department

A functional area in a business dedicated to the upkeep, repair, and smooth operation of assets and equipment.

Direct Expenses

Costs that can be directly attributed to the production of goods or services, such as raw materials and labor.