A Logging Company Is Considering Logging an Area for a Current

question 144

Multiple Choice

A logging company is considering logging an area for a current cost of $500 per acre to obtain a profit the next year of $600 per acre. The market rate of interest is 10 percent. Should the company make the investment?

• A)Yes, the future value of the profit is greater than the present value of the cost.
• B)No, the future value of the profit is less than the present value of the cost.
• C)Yes, the present value of the profit is greater than the present value of the cost.
• D)No, the present value of the profit is less than the present value of the cost.

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Definitions:

Transaction Needs

Describes the demand for money for the purpose of conducting daily transactions, such as purchasing goods and services.

Disbursement Float

The time lag between when a check is written and when it is actually deducted from the payer's account.