The Present Value of the Following Cash Flows Is Known

question 112

Multiple Choice

The present value of the following cash flows is known to be $6,939.91; $500 today, $2,000 in one year, and $5,000 in two years.What discount rate is being used?

• A)3 percent
• B)4 percent
• C)5 percent
• D)6 percent $6,939.91 = $500/(1 + i)⁰ + $2,000/(1 + i)¹ + $5,000/(1 + i)²

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Definitions:

T-Accounts

A visual representation of accounts used in double-entry bookkeeping, showing debits on the left side and credits on the right.

Cost Of Goods Sold

The expenses directly related to the manufacture of products a company sells, which include the costs of materials and labor.

Manufacturing Overhead

All manufacturing costs that are not directly linked to the production of goods, including indirect materials, indirect labor, and other indirect expenses.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders.