Which of the Following Definitions of "Present Value of an Uneven

question 5

Multiple Choice

Which of the following definitions of "Present Value of an Uneven Payment Series" is true?

• A) We are calculating the future value of a series of uneven payments by averaging out the uneven payments.
• B) We calculate the present value of a series of uneven payments by averaging out the uneven payments.
• C) We calculate the present value by using the following equation after taking an average of all payments,
• \(\begin{array} { c }
• N \\
• \text { PVA=PMT } \left. \sum _ { n = 1 } [ 1 / 1 + \mathrm { r } ) ^ { \mathrm { n } } \right]
• \end{array}\)
• D) There is no simple equation. We must calculate the present value for each payment separately and then sum up the individual PVs.
• E) There is no way to determine this amount accurately.

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Definitions:

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a net income or loss.

Temporal Method

An exchange rate conversion method used in translating foreign currency financial statements, where monetary items are converted at the current exchange rate and non-monetary items at historical rates.

Net Realizable Value

The estimated selling price in the regular course of business minus any costs of completion, disposal, and transportation.

Inventory

The goods and materials a business holds for the purpose of sale or production.