Jolene Has Just Become Entitled to Receive Equal Annual Payments

question 50

Multiple Choice

Jolene has just become entitled to receive equal annual payments of $10,000 for ten years from a trust fund that her grandparents had set up for her. The payments will begin immediately.
Jolene has learned she can sell the rights to these payments for a lump sum today. If Jolene can
Earn 6% on her money, what is the minimum amount for which she should sell the fund?
Round your answer to the nearest dollar.

• A)$73,601
• B)$131,808
• C)$78,017
• D)$100,000

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Definitions:

Accounts Receivable Turnover

A ratio that measures how effectively a company collects its receivables or the efficiency of its credit policies.

Working Capital

The difference between a company's current assets and current liabilities, indicating short-term financial health and operational efficiency.

Current Ratio

A liquidity ratio that measures a company's ability to cover its short-term obligations with its current assets.

Times Interest Earned

A ratio that assesses the risk that bondholders will not receive their interest payments or that interest payments will not be made if earnings decrease. The ratio is computed as income before income tax expense plus interest expense divided by interest expense.