Question 1

Computing the present value of future dollars is known as:

Accepted Answer

A) interpolating. 
B) compounding. 
C) annualizing. 
D) discounting. 
A) interpolating. 
B) compounding. 
C) annualizing. 
D) discounting. D

Question 2

You have deposited $15,584 in a special account that has a guaranteed rate of return.If you withdraw $3,700 at the end of each year for 5 years,you will completely exhaust the balance in the account.The guaranteed rate of return is closest to:

Accepted Answer

A) 6% 
B) 19% 
C) 24% 
D) 4% 
A) 6% 
B) 19% 
C) 24% 
D) 4% A

Question 3

The present value of a cash flow will never be less than the future dollar amount of the cash flow.

Accepted Answer

A) True 
 B)False  False

Question 4

How much would you have to invest today in the bank at an interest rate of 5% to have an annuity of $1,400 per year for 5 years,with nothing left in the bank at the end of the 5 years? Select the amount below that is closest to your answer.

Accepted Answer

A) $6,667 
B) $6,061 
C) $7,000 
D) $1,098 
A) $6,667 
B) $6,061 
C) $7,000 
D) $1,098

Question 5

Harry has just inherited $300,000.Harry has decided to quit his job and go to school full time for the next five years by living off this inheritance.Harry will invest the $300,000 in a money market account that has an 8% interest rate.If Harry's goal is to use up the entire inheritance,approximately what amount can he withdraw from the money market account each year for the next five years? Assume that his first withdrawal will be one year from the day that he sets up the account.

Accepted Answer

A) $64,800 
B) $74,400 
C) $75,131 
D) $84,000 
A) $64,800 
B) $74,400 
C) $75,131 
D) $84,000

Question 6

Latting Corporation has entered into a 7 year lease for a building it will use as a warehouse.The annual payment under the lease will be $4,781.The first payment will be at the end of the current year and all subsequent payments will be made at year-ends.If the discount rate is 6%,the present value of the lease payments is closest to:

Accepted Answer

A) $31,573 
B) $22,257 
C) $33,467 
D) $26,688 
A) $31,573 
B) $22,257 
C) $33,467 
D) $26,688

Question 7

The present value of a given amount increases as the number of years over which it is to be discounted decreases.

Accepted Answer

A) True 
 B)False

Question 8

You have deposited $16,700 in a special account that has a guaranteed rate of return of 11% per year.If you are willing to completely exhaust the account,what is the maximum amount that you could withdraw at the end of each of the next 6 years? Select the amount below that is closest to your answer.

Accepted Answer

A) $3,465 
B) $3,089 
C) $2,783 
D) $3,947 
A) $3,465 
B) $3,089 
C) $2,783 
D) $3,947

Question 9

The higher the discount rate,the lower the present value of a given future cash flow.

Accepted Answer

A) True 
 B)False

Question 10

Assume you can invest money at a 14% rate of return.How much money must be invested now in order to be able to withdraw $5,000 from this investment at the end of each year for 8 years,the first withdrawal occurring one year from now?

Accepted Answer

A) $24,840 
B) $23,195 
C) $21,440 
D) $1,755 
A) $24,840 
B) $23,195 
C) $21,440 
D) $1,755

Question 11

James just received an $8,000 inheritance check from the estate of his deceased rich uncle.James wants to set aside enough money to pay for a trip in five years.If the trip is expected to cost $5,000,how much of the $8,000 must James deposit now if the rate of return is 12% per year in order to have the $5,000 in five years?

Accepted Answer

A) $2,535 
B) $2,835 
C) $2,000 
D) $5,000 
A) $2,535 
B) $2,835 
C) $2,000 
D) $5,000

Question 12

Schaad Corporation has entered into an 8 year lease for a piece of equipment.The annual payment under the lease will be $2,500,with payments being made at the beginning of each year.If the discount rate is 14%,the present value of the lease payments is closest to:

Accepted Answer

A) $20,000 
B) $7,011 
C) $17,544 
D) $14,097 
A) $20,000 
B) $7,011 
C) $17,544 
D) $14,097

Question 13

The present value of an amount to be received in five years is greater than the present value of the same amount to be received in ten years.

Accepted Answer

A) True 
 B)False

Computing the present value of future dollars is known as:

You have deposited $15,584 in a special account that has a guaranteed rate of return.If you withdraw $3,700 at the end of each year for 5 years,you will completely exhaust the balance in the account.The guaranteed rate of return is closest to:

The present value of a cash flow will never be less than the future dollar amount of the cash flow.

How much would you have to invest today in the bank at an interest rate of 5% to have an annuity of $1,400 per year for 5 years,with nothing left in the bank at the end of the 5 years? Select the amount below that is closest to your answer.

The present value of a given amount increases as the number of years over which it is to be discounted decreases.

You have deposited $16,700 in a special account that has a guaranteed rate of return of 11% per year.If you are willing to completely exhaust the account,what is the maximum amount that you could withdraw at the end of each of the next 6 years? Select the amount below that is closest to your answer.

The higher the discount rate,the lower the present value of a given future cash flow.

Assume you can invest money at a 14% rate of return.How much money must be invested now in order to be able to withdraw $5,000 from this investment at the end of each year for 8 years,the first withdrawal occurring one year from now?

Schaad Corporation has entered into an 8 year lease for a piece of equipment.The annual payment under the lease will be $2,500,with payments being made at the beginning of each year.If the discount rate is 14%,the present value of the lease payments is closest to:

The present value of an amount to be received in five years is greater than the present value of the same amount to be received in ten years.

Managerial Accounting and Cost Concepts

Job-Order Costing: Calculating Unit Production Costs

Job-Order Costing: Cost Flows and External Reporting

Process Costing

Supplement: Process Costing Using the Fifo Method

Cost-Volume-Profit Relationships

Variable Costing and Segment Reporting: Tools for Management

Activity-Based Costing: a Tool to Aid Decision Making

Master Budgeting

Flexible Budgets and Performance Analysis

Differential Analysis: The Key to Decision Making

Performance Measurement in Decentralized Organizations

Differential Analysis: The Key to Decision Making

Capital Budgeting Decisions

Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

Journal Entries to Record Variance

The Direct Method of Determining the Net Cash Provided by Operating Activities

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Exam 17: The Concept of Present Value

Computing the present value of future dollars is known as:

You have deposited $15,584 in a special account that has a guaranteed rate of return.If you withdraw $3,700 at the end of each year for 5 years,you will completely exhaust the balance in the account.The guaranteed rate of return is closest to:

The present value of a cash flow will never be less than the future dollar amount of the cash flow.

How much would you have to invest today in the bank at an interest rate of 5% to have an annuity of $1,400 per year for 5 years,with nothing left in the bank at the end of the 5 years? Select the amount below that is closest to your answer.

The present value of a given amount increases as the number of years over which it is to be discounted decreases.

The higher the discount rate,the lower the present value of a given future cash flow.

Assume you can invest money at a 14% rate of return.How much money must be invested now in order to be able to withdraw $5,000 from this investment at the end of each year for 8 years,the first withdrawal occurring one year from now?

Schaad Corporation has entered into an 8 year lease for a piece of equipment.The annual payment under the lease will be $2,500,with payments being made at the beginning of each year.If the discount rate is 14%,the present value of the lease payments is closest to:

The present value of an amount to be received in five years is greater than the present value of the same amount to be received in ten years.

Managerial Accounting and Cost Concepts

Job-Order Costing: Calculating Unit Production Costs

Job-Order Costing: Cost Flows and External Reporting

Process Costing

Supplement: Process Costing Using the Fifo Method

Cost-Volume-Profit Relationships

Variable Costing and Segment Reporting: Tools for Management

Activity-Based Costing: a Tool to Aid Decision Making

Master Budgeting

Flexible Budgets and Performance Analysis

Differential Analysis: The Key to Decision Making

Performance Measurement in Decentralized Organizations

Differential Analysis: The Key to Decision Making

Capital Budgeting Decisions

Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System

Journal Entries to Record Variance

The Direct Method of Determining the Net Cash Provided by Operating Activities

Filters