Why Is It Usually Necessary to Use the Time Value

question 79

Multiple Choice

Why is it usually necessary to use the time value of money when performing a cost-benefit analysis?

• A)In most investment projects costs are incurred up front, but benefits are provided in the future.
• B)Although costs and benefits generally occur concurrently, the benefits will accrue value over time, due to interest.
• C)For practical purposes, a dollar today may be considered to be equal to a dollar at some future time.
• D)For an investment project to be considered, costs must have a higher dollar value from benefits.

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Definitions:

Good Faith

A principle that emphasizes honesty, fairness, and integrity in the fulfillment of contractual obligations or in negotiations.

Reasonable Commercial Standards

A legal concept referring to the standard practices and methods used by reasonably prudent and competent parties in a particular industry.

Honesty

The quality of being truthful and free from deceit or fraud.

Holder In Due Course

A legal term for a party that has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defects in title and prior claims.