You Have Just Calculated the Present Value of the Expected

question 11

Multiple Choice

You have just calculated the present value of the expected cash flows of a potential investment.Management thinks your figures are too low.Which of the following actions would improve the present value of your cash flows?

• A)extend the cash flows over a longer period of time
• B)increase the discount rate
• C)decrease the discount rate
• D)extend the cash flows over a longer period of time, and decrease the discount rate

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Definitions:

Machine-Hours

A measure of production time, representing the total hours worked by machines in the manufacturing process, often used to allocate manufacturing overhead to products.

Markup

The extra sum included in the buying price of items to account for operational expenses and profit, which establishes the sales price.

Job-Order Costing

A cost accounting system that assigns costs to specific jobs or batches, used in industries where products are distinctly different.

Predetermined Overhead Rate

An estimated overhead rate used to apply manufacturing overhead to products, calculated before the accounting period begins.