What Is the Present Value of $300 Received at the Beginning

question 3

Multiple Choice

What is the present value of $300 received at the beginning of each year for five years? Assume that the first payment is not received until the beginning of the third year (thus the last payment is received at the beginning of the seventh year) . Use a 10% discount rate, and round your answer to the nearest $1.00.

• A) $1,137
• B) $854
• C) $940
• D) $1,257

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Definitions:

Patents

Legal documents granted by the government that give an inventor exclusive rights to make, use, or sell an invention for a certain period of time.

Imitation

The act of copying or mimicking the strategies, products, or processes of individuals or enterprises, often seen as a way to gain a competitive advantage or innovate.

Fast-Second Strategy

A business approach where companies wait to see which innovations prove viable and then quickly follow with improvements and cost reductions.

Collusion

A situation in which firms act together and in agreement (collude) to fix prices, divide a market, or otherwise restrict competition.