At Which Interest Rate Is the Present Value of $196

question 209

Multiple Choice

At which interest rate is the present value of $196.85 three years from today equal to $175 today?

• A)2 percent
• B)4 percent
• C)6 percent
• D)8 percent

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Definitions:

Depreciation Expense

Depreciation expense is the allocated amount of the cost of a tangible or physical asset that is expensed over its useful life, reflecting wear and tear or obsolescence.

Gain On Sale

The profit realized when an asset is sold for more than its book value.

Indirect Method

A way of presenting the cash flow statement that adjusts net income for changes in balance sheet accounts to calculate cash flow from operating activities.

Depreciation Expense

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