You Have Some Property for Sale and Have Received Two

question 126

Multiple Choice

You have some property for sale and have received two offers. The first offer is for $89,500 today in cash. The second offer is the payment of $35,000 today and an additional $70,000 two years from today. If the applicable discount rate is 11.5 percent, which offer should you accept and why?

• A)You should accept the $89,500 today because it has the higher net present value.
• B)You should accept the $89,500 today because it has the lower future value.
• C)You should accept the first offer as it has the greatest value to you.
• D)You should accept the second offer because it has the larger net present value.
• E)It does not matter which offer you accept as they are equally valuablE.

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Definitions:

Liquidity Ratios

Financial metrics used to determine a company's ability to pay off its short-term debts with its liquid assets, critical for assessing financial health.

Asset Management Ratios

Financial metrics that assess how efficiently a company is using its assets to generate revenue, including turnover ratios for receivables, inventory, and assets.

Leverage Ratios

Financial metrics used to assess the degree of debt in a company's capital structure and its ability to meet financial obligations.

Inventory Turnover

A measure of how quickly a company sells and replaces its stock of goods within a given period.