Which of the Following Decisions Would Involve the Use of the Present

question 79

Multiple Choice

Which of the following decisions would involve the use of the present value of $1?

• A) Your brother buys your car and offers to pay you $500 per year for three years or $1,500 in two years.
• B) You win a lawsuit and are offered a lump-sum payment today of $100,000 or $15,000 a year for 20 years.
• C) Your father and mother wish to deposit enough money on the date of your high school graduation to enable you to take a cruise that will cost $7,000 when you graduate from college in 4 years.
• D) You want to have $1,000,000 in order to retire at age 55, but need to know how much you will need to deposit each year from now until your 55th birthday.

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Definitions:

Unrelated Products

Products that have no significant connection or complementarity in use, production, or marketing to each other.

Existing Goods

Products that have already been manufactured and are available for sale or distribution.

Revenue Analysis

The process of examining revenue data to understand the financial performance of a business and to identify trends and opportunities for improvement.

Profit Margin

The amount a product sells for above the total cost of the product itself.