You Are Presented with Two Cash Flow Options: Option Near,a

question 6

Multiple Choice

You are presented with two cash flow options: Option Near,a $5,000 annuity for three years,with the first cash flow one year from today,or Option Far,a $5,000 annuity for six years with the first cash flow ten years from today.Assuming an interest rate of 7.0%,which set of cash flows has a greater present value?

• A)Option Near has a greater PV of $13,121.58 vs.Option Far PV of $12,963.41.
• B)Option Far has a greater PV of $13,121.58 vs.Option Near PV of $12,963.41.
• C)Option Far has a greater PV of $30,000 vs.Option Near PV of $15,000.
• D)Option Near and Option Far have the same PV of $12,963.41.

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Definitions:

Critical Incidents Method

A performance appraisal method that focuses on the most significant events (or incidents) involving the employee during the review period.

Graphic Ratings Method

A performance evaluation technique where employees are rated on predefined categories using a visual scale or graph.

Essay Method

A trait approach to performance rating that requires the rater to compose a statement describing employee behaviour.

Critical Incidents Method

A performance appraisal method focusing on the most significant actions of an employee, either positively or negatively impacting their job effectiveness.