The Formula for Calculating the Present Value Factor for an Annuity

question 103

Multiple Choice

The formula for calculating the present value factor for an annuity of $1 is

• A) Amount to be invested / Annual average net income
• B) Annual net cash flow / Amount to be invested
• C) Annual average net income / Amount to be invested
• D) Amount to be invested / Equal annual net cash flows

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Definitions:

CAFR

Comprehensive Annual Financial Report; a set of government financial statements that goes beyond the requirements of generally accepted accounting principles, including details on all funds and activities.

Introductory

Refers to the initial stage or beginning phase of a process, policy, or product.

Modified Approach

An alternative accounting method allowing certain assets to be reported at historical cost rather than being continuously adjusted for market valuation.

Infrastructure Assets

Long-term physical assets that are foundational for providing public services, such as roads, bridges, water systems, and utilities.