The Present Value of a $20,000 Perpetuity at a 7

question 127

Multiple Choice

The present value of a $20,000 perpetuity at a 7 percent discount rate is

• A)$186,915.
• B)$285,714.
• C)$140,000.
• D)$325,000.

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Definitions:

Taxable Income

The portion of income subject to taxes after adjustments, deductions, and exemptions are applied to gross income.

FMV

The fair market value, or the price that property would sell for on the open market between a willing buyer and a willing seller.

Complete Liquidation

The process of closing a business by selling all assets, paying off creditors, and distributing any remaining assets to shareholders or owners.

Basis

The amount of investment in property for tax purposes, used to determine the gain or loss on the sale, exchange, or other disposition of the property.