Alison Has $5000 to Invest and Is Trying to Decide

question 79

Multiple Choice

Alison has $5000 to invest and is trying to decide between two investment opportunities. One investment offers her future cash flows of $2000 for each of the next five years. Another investment offers her future cash flows of $5000 in year five and $7500 in year six. In order for her to compare the future cash flows of these two investments, what will she need to calculate?

• A) annuity value
• B) average annual payout
• C) common payout value
• D) present value

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Definitions:

Liabilities

Liabilities represent obligations or debts that a company owes to external parties, which must be settled through the transfer of assets or services.

Assets

Economic resources owned by a business or individual, expected to bring future benefits.

Net Income

The total profit or loss of a business after all expenses, taxes, and costs have been subtracted from total revenue.

Net Loss

A situation where total expenses exceed total revenues, indicating a negative profit.