What is the present value of Rs. 1,100 receivable after one year when the annual discount rate is 10%?
Correct answer: B. Rs. 1,000
- A. Rs. 900
- B. Rs. 1,000
- C. Rs. 1,010
- D. Rs. 1,210
Explanation
Present value equals future value divided by one plus the discount rate. Therefore, Rs. 1,100 divided by 1.10 equals Rs. 1,000. Rs. 1,210 is the future value produced by compounding, not the present value.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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