What Is the Present Value (PV) of an Investment That

question 58

Multiple Choice

What is the present value (PV) of an investment that will pay $500 in one year's time, and $500 every year after that, when the interest rate is 10%?

• A) $2500
• B) $4000
• C) $3000
• D) $5000

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Definitions:

EPS Variability

Fluctuations in a company's earnings per share over time, indicating the volatility of its profitability.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the fixed versus variable costs structure of a business.

Financial Leverage

A technique employed by companies to increase their market value and return on investment by using debt to finance its operations.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability calculated by excluding interest and income tax expenses.