If the Interest Rate Is 7 Percent, What Is the Current

question 17

Multiple Choice

If the interest rate is 7 percent, what is the current value of $80 to be received one year from now?

• A) $47.05
• B) $74.77
• C) $85.60
• D) $136

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Definitions:

Expected Earnings

Predictions or estimates of a company's profit during a specific period in the future, often used by investors to make informed decisions.

Unlevered Cost

The cost of an investment that does not take into account the effect of financial leverage, or borrowing.

Debt-Equity Ratio

The debt-equity ratio is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.

Pre-Tax Cost

The expense or cost that a company incurs which is calculated before any taxes are applied.