Answer:
- <u><em>d) increases as the interest rate decreases.</em></u>
Explanation:
<em>Present value</em> is the value today; future value is the value some time in the future.
The mere notion of the value of money in time should tell you that, further away in time (towards the future) a sum of money is found, the lower its value today.
Then, you should be able to rule out some propositions that are contrary to that intuition:
- a<em>) decreases as the time period decreases</em> ↔ clearly false: the present value increases as the time period decreases
- <em>e) is directly related to the time period</em>. ↔ clearly false: the present value is inversely related to the time period.
How is the present value related to the future value?
They are directly related: the higher a lump sum in the future the higher the value of it in the present; more money is more money always. More money in the future has more value in the present; less money in the future has less value in the present. Thus, the option <em>b). is inversely related to the future value</em> is false
How is the present value related to the interest rate?. Which one is true?
- c) is directly related to the interest rate, or
- d) increases as the interest rate decreases
The present value is calculated discounted the future value at the interest rate. The interest rate is in the denominator of the equation to pass from future value to present value. Thus, they are inversely related (c is false); the less the interest rate, the higher the present value of a future amount (confirm d is true).
Therefore, the correct answer is that <em>the present of a lump sum future amount: </em><em><u>d) increases as the interest rate decreases.</u></em>
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Answer:
<u>Details April May June </u>
Unit to be produced 576 630 608
Explanation:
The production budget For April, May, and June can be prepared as follows:
Ruiz Co.
Production Budget
For April, May, and June
<u>Details April May June </u>
Next month's budgeted sales (A) 640 590 680
Ratio of inventory to future sales (B) 20% 20% 20%
Budgeted ending inventory (C = A * B) 128 118 136
Budgeted unit sales for month (D) 560 640 590
Req'd units of avail. production (E = C + D) 688 758 726
Budgeted beginning inventory (F) 112 128 118
Unit to be produced (G = E - F) 576 630 608
Answer:
The present value at 11% is $3,902.13,$3,479.85 at 16% and $2,615.57 at 30%
Explanation:
The present value formula is given as :
PV=FV/(1+r)^n
Where FV is the future value of cash flows such as the ones given in the question
r is the rate of return at 11%,16% and 30%
n is the applicable time horizon relevant to each of the cash flow.
Find attached spreadsheet for detailed calculations.
Answer:
Hidden Valley's Asset Turnover = 1.6
Explanation:
Average Total Asset = (Total Assets at the beginning of the year + Total Assets at the end of the year)/2
Average Total Asset = (450,000+550,000)/2
Average Total Asset = 1,000,0000/2 = 500,000
Asset Turnover = Net Sales / Average Total Asset
Asset Turnover = 800,000/500,000
Asset Turnover = 8/5
Asset Turnover = 1.6