Sharon Smith Will Receive $1,000,000 in 50 Years

question 25

Multiple Choice

Sharon Smith will receive $1,000,000 in 50 years.The discount rate is 14%.As an alternative she can receive $2,000 today.Which should she choose?

• A) The $1,000,000 in 50 years.
• B) The $2,000 today.
• C) She should be indifferent.
• D) It depends on the inflation rate.

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Definitions:

Accrued Liabilities

Expenses that have been incurred but not yet paid, recorded on the balance sheet until they are paid.

Indirect Method

A method of reporting cash flows from operating activities by adjusting net income for changes in balance sheet accounts.

Accounts Receivable

Money owed to a company by its customers for goods or services already delivered but not yet paid for.

Inventory

The complete list of items, such as raw materials, work-in-progress, and finished goods, that a company holds, which are often considered as assets.