In Answering Which of the Following Questions Would You Find

question 206

Multiple Choice

In answering which of the following questions would you find it necessary to calculate a future value?

• A)If Jill puts $5,000 today into a bank account that pays 3 percent interest,then how much will she have in the account after 2 years?
• B)Should ABC Corporation buy a factory today for $2 million,knowing that the factory will yield the corporation $3 million after 5 years?
• C)As the winner of a lottery,should Michael choose an immediate payment of $250,000 or should he choose annual payments of $30,000 for each of the next 10 years?
• D)You would find it necessary to calculate a future value in order to answer all of these questions.

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Definitions:

Direct Labor Costs

Expenses related to the payment of wages for employees directly involved in producing goods or providing services.

Manufacturing Overhead Costs

Indirect expenses related to the production process, such as utilities, depreciation, and salaries for factory support staff.

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the benefit (return) of an investment by the cost of the investment.

Investment Center

A business unit within an organization that is responsible for its own revenues, expenses, and investments, and is evaluated on its return on investment.