Jenni's Diner Has Expected Net Annual Cash Flows of $16,200,$18,600,$19,100,and

question 98

Multiple Choice

Jenni's Diner has expected net annual cash flows of $16,200,$18,600,$19,100,and $19,500 for the next four years,respectively.At the end of the fourth year,the diner is expected to be worth $57,900 cash.What is the present value of the diner at a discount rate of 11.6 percent?

• A)$93,090.25
• B)$87,492.16
• C)$101,016.38
• D)$104,998.02
• E)$98,411.20

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Definitions:

Variable Costing

An accounting method that only considers variable costs in product pricing and decision making.

Fixed Overhead Expensed

The practice of charging fixed overhead costs to the income statement in the period they are incurred, rather than allocating them to products.

Inventories

Properties or goods meant for selling in regular business activities, under production for sale, or as resources and supplies for consumption during the production phase or while delivering services.

Step-Down Method

An accounting method used in cost allocation that sequentially allocates service department costs to other departments, including production ones.