You Have Some Property for Sale and Have Received Two

question 1

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 percent,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:

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated before the next period's inventory is added.

Debt to Total Assets

A financial ratio that measures the percentage of a company's assets financed through debt.

Liquidity

The measure of how easily an asset can be converted into cash without affecting its market price.

Asset Management

The process of developing, operating, maintaining, and selling assets in a cost-effective manner.