You Have Some Property for Sale and Have Received Two

question 104

Multiple Choice

You have some property for sale and have received two offers. The first offer is for $189,000 today in cash. The second offer is the payment of $100,000 today and an additional $100,000 two years from today. If the applicable discount rate is 8.75%,which offer should you accept and why?

• A) You should accept the $189,000 today because it has the higher net present value.
• B) You should accept the $189,000 today because it has the lower future value.
• C) You should accept the second offer because you will receive $200,000 total.
• D) You should accept the second offer because you will receive an extra $11,000.
• E) You should accept the second offer because it has a present value of $194,555.42.

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Definitions:

Sporting Equipment

Items and gear used in sports and physical activities to enhance performance or ensure safety.

Direct Materials

The raw materials that are directly used in the manufacturing of a product and can be easily traced to it.

Job 101

A specific task or project identified by a numerical code, often used in job costing systems to track costs and progress.

Predetermined Overhead Rate

A rate calculated before a period begins, based on the estimated overhead costs and estimated activity base, used to allocate overhead costs to products or job orders.