If the Interest Rate Is 6%, Which Expression Will Determine

question 217

Multiple Choice

If the interest rate is 6%, which expression will determine the appropriate price to pay for a business that you expect to earn $5,000 in each of the next ten years and be sold for $25,000 in the eleventh year.

• A)PV = $5,000[FVFA_6,10] + $25,000[FVF_6,11]
• B)PV = $5,000[PVFA_6,10] + $25,000[FVF_6,11]
• C)PV = $5,000[PVFA_6,10] + $25,000[PVF_6,11]
• D)None of the above

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Definitions:

Activity Variance

A measure used in budgeting and accounting to compare actual activity levels to predetermined expectations or standards.

Cost Formula

A mathematical expression that calculates the total cost by combining fixed costs, variable costs per unit, and the number of units produced or sold.

Servicing Materials

Supplies or materials used in the maintenance or repair of equipment.

Spending Variance

The difference between the budgeted amount of expense and the actual amount spent.