Suppose That You Are Considering an Investment That Will Pay

question 32

Multiple Choice

Suppose that you are considering an investment that will pay you $4,000 per year for the next five years.The appropriate rate of interest is 5%.You want to know the present value of the cash flows from this investment.To solve this problem in Microsoft Excel,you would use which of the following Excel formulas?

• A) =PV(.05,5,4000,0,0)
• B) =PV(.05,5,4000,0,1)
• C) =PV(5,.05,4000,0)
• D) =PV(5,5,4000,0)

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Definitions:

Acquisition Date

The specific date on which control of the assets of an acquired company is transferred to the buyer.

Deferred Tax Item

A financial item on the balance sheet that arises due to timing differences between the recognition of income and expenses for accounting and tax purposes.

Goodwill

An intangible asset that arises when a business is purchased for more than the fair value of its separate net assets.