The Gideon Corp

question 133

Multiple Choice

The Gideon Corp. is considering making an investment in a project of $1,000,000. It expects to receive five payments of $300,000 each. Its discount rate is 8%. A table shows that the present value of an annuity of five payments of $1 each, at 8%, has a value of 4.1002. The net present value of this investment opportunity is approximately

• A) Zero
• B) 230600
• C) 500000
• D) 1230600

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Definitions:

General Journal

A comprehensive journal that records the initial data for all different types of financial transactions.

Ledger

An accounting book or computer file used for recording and totaling economic transactions measured in terms of a monetary unit, by account.

Posting

The process of recording amounts as debits or credits in the accounts of a company's general ledger.

Debt Ratio

A ratio indicating a company's level of indebtedness by dividing its total liabilities by its total assets.