The Higher the Interest Rate Assumed,the

question 146

Multiple Choice

The higher the interest rate assumed,the

• A)higher the present value of an ordinary annuity.
• B)more one must deposit today to accumulate to a desired sum.
• C)lower the future value of a sum invested in the bank today.
• D)lower the present value of a sum due in the future.

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Definitions:

Depreciation Expense

Refers to the allocation of the cost of a tangible asset over its useful life.

Incremental Net Income

The increase in net income resulting from a particular business decision compared to the scenario where the decision is not made.

Income Tax Expense

The amount of money a company or individual owes in taxes based on the taxable income for a given period, typically one year.

Profitability Index

A calculation used to determine the relative profitability of a project by dividing the present value of future cash flows by the initial investment.