Suppose Penny Will Receive $2,000 Per Year Forever from Her

question 165

Multiple Choice

Suppose Penny will receive $2,000 per year forever from her local bank when the prevailing interest rate is 7 percent.The present value of that income stream is approximately _____

• A)$20,000.
• B)$62,472.
• C)$100,087.
• D)$27,000.
• E)$28,571.

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Definitions:

Payables Period

The average period of time it takes for a business to pay off its debts to suppliers.

Credit Sales

Sales transactions where the payment is deferred, allowing the buyer to pay at a later date.

COGS

The Cost of Goods Sold represents the direct expenses related to the production of goods that a company sells.

Accounts Payable

Amounts a company owes to suppliers for goods or services acquired on credit.