The Net Present Value of $100, Delivered One Year from Now

question 27

Multiple Choice

The net present value of $100, delivered one year from now, would

• A) fall if the rate of interest increased.
• B) fall if the rate of interest decreased.
• C) rise if the rate of interest increased.
• D) not change if the interest rate changed.

---

Definitions:

Direct Materials

Fundamental components directly associated with the creation of a specific item or provision of a service.

Direct Labor

The cost of employee labor that is directly involved in the manufacturing or production of goods or services.

Factory Overhead

Represents all indirect costs associated with the production process, including utilities, maintenance, and managerial salaries not directly traceable to specific products.

Factory Overhead Rates

The rates at which indirect manufacturing costs are applied to units produced, based on a predetermined allocation base.