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:

Consignment

The process of giving goods to another party to sell, but retaining ownership until the goods are sold.

Weekly Salary

Weekly salary refers to the amount of money an individual earns per week for their labor or services.

Commission

Remuneration for sales or service personnel, calculated as a fixed percentage of the sales they accomplish.

Bonus

An extra payment made to an employee beyond their normal salary, often reflecting their performance or company success.