Figure 14-6.Present Value of $1

question 6

Multiple Choice

Figure 14-6.Present value of $1
Present value of an Annuity of $1

-Refer to Figure 14-6. Roman Knoze is considering two investments. Each will cost $20,000 initially. Project 1 will return annual cash flows of $10,000 in each of three years. Project 2 will return $5,000 in year 1, $10,000 in year 2, and $15,000 in year 3. Roman requires a minimum rate of return of 10%. What is the net present value of Project 2?

• A) $5,670
• B) $20,000
• C) $2,530
• D) $24,070
• E) $4,070

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Definitions:

Equivalent Units of Production

A concept in process costing that converts partially completed products into an equivalent number of fully completed units for inventory accounting purposes.