Use the Present Value and Future Value Tables Included in Appendix

question 87

Multiple Choice

Use the present value and future value tables included in Appendix 8 and on the textbook companion website.
- Assume you are going to purchase a house. You have $40,000 to use as a down payment and can afford a payment of $16,000 per year for 30 years. If interest is 8 percent per year, what is the largest purchase price of the house that you can buy?

• A) $20,795
• B) $225,156
• C) $260,000
• D) $220,125

---

Definitions:

Fixed Costs

Fixed costs that stay the same no matter how much is manufactured or sold, including expenses for rent, employee salaries, and insurance charges.

Hard Rationing

A situation where companies cannot obtain funds for projects despite having positive net present values due to external financing constraints.

Capital Funds

Financial resources that are used to fund a company's operations and growth, typically sourced from equity or debt.

Net Present Value

A method to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows over a period.