A Potential Investment Pays $10 Per Year Indefinitely

question 16

Multiple Choice

A potential investment pays $10 per year indefinitely.The appropriate discount rate for the potential investor is 10%.The present value of this cash flow is calculated by:

• A)multiplying $10 by the appropriate present value factor
• B)dividing $10 by 10
• C)multiplying $10 by the present value factor of an annuity
• D)dividing $10 by .10

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Definitions:

Credit Balance

A positive amount that represents a sum of money owed to a company in its books.

Form W-4

A U.S. tax form used by employees to indicate their tax situation to their employer, such as marital status and allowances, to determine withholding tax.

Federal Income Taxes

Taxes levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities.

Defined Contribution Plans

Retirement plans in which the amount invested in the plan is defined, but the future benefit to be received is not.