Find the Future Value at the End of Year 3

question 12

Multiple Choice

Find the future value at the end of year 3 of the following stream of cash flows received at the end of each year, assuming the firm can earn 8 percent on its investments.

• A) $45,000
• B) $53,396
• C) $47,944
• D) $56,690

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Definitions:

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Variable Costing

An accounting method that includes only variable costs - costs that change with production levels - in product cost calculations.

Net Operating Income

It refers to the profit generated from a company's ordinary, core business operations after subtracting operating expenses from operating revenues.

First Year

The initial year of operation, production, or accounting period.