When Using the Net Present Value Method to Compare Keeping

question 51

Multiple Choice

When using the net present value method to compare keeping an old building or disposing of it and acquiring a new building, the current cash residual value of the old building should be

• A) a subtraction from the price paid for the new building.
• B) viewed as a cash flow.
• C) an addition to the price paid for the new building.
• D) irrelevant to the decision.

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Definitions:

Payment

The transfer of money or goods from one party to another in exchange for goods, services, or to fulfill a legal obligation.

Acceptance

In contract law, the expression of assent to the terms of an offer in such a manner that a binding contract is formed between the parties.

Waiver Of Presentment

An agreement to waive the formal presentation of an instrument, such as a check or draft, for payment.

Notice Of Dishonor

A formal notification indicating that a negotiable instrument, such as a check, has been refused payment.