Which Is Greater, the Present Value of a Five-Year Ordinary

question 111

Multiple Choice

Which is greater, the present value of a five-year ordinary annuity of $300 discounted at 10%, or the present value of a five-year ordinary annuity of $300 discounted at 0% that has its first cash flow six years from today?

• A) The first annuity because the cash flows occur sooner.
• B) The second annuity because the cash flows are discounted at a lower interest rate.
• C) The two annuities are of equal value.
• D) The answer to this question cannot be determined.

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Definitions:

Materials Costs

The total expense incurred from acquiring raw materials used in the manufacturing or production process.

Receiving Report

A document used to record the receiving of goods, detailing the quantity and condition of the goods received.

Materials Ledger Card

A record card that tracks the quantity and value of materials on hand in inventory over time.

General Ledger

A comprehensive record of all financial transactions over the life of an organization, serving as the primary source for preparing financial statements.