Suppose You Have a Winning Lottery Ticket and You Are

question 43

Multiple Choice

Suppose you have a winning lottery ticket and you are given the option of accepting $3,000,000 three years from now or taking the present value of the $3,000,000 now.The sponsor of the prize uses a 6% discount rate.If you elect to receive the present value of the prize now, the amount you will receive is

• A)$2,518,860.
• B)$2,591,520.
• C)$2,670,000.
• D)$3,000,000.

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Definitions:

Operating Period

The span of time during which a business or a particular machinery is operational or in use.

Net Operating Income

Revenue from the primary business activities of a company, with no deductions for interest and taxes.

Variable Manufacturing Overhead

Variable manufacturing overhead refers to the manufacturing costs that vary with the level of production output, such as utilities and certain labor costs.

Variable Cost

Costs that vary directly with the level of production or volume of output.