What Is the Present Value of a Payment of $1,000

question 188

Multiple Choice

What is the present value of a payment of $1,000 two years from now if the interest rate is 6%?

• A)$2,000/1.06
• B)$1000/(1.06)²
• C)$1000/(1 + 0.06²)
• D)None of the above are correct.

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Definitions:

Prospective Overhead Rate

An estimated rate used to allocate overhead costs to products or services based on future expected activities and expenditures.

Fixed Overhead

Fixed costs that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance, required to run a business's operations.

Production Targets

Specific goals set for the quantity of products to be produced within a given time frame.

Cost Behavior

The way in which a cost changes in relation to variation in an activity level or volume.