What is the present value of Rs. 1,100 receivable after one year when the annual discount rate is 10%?
Correct answer: A. Rs. 1,000
- A. Rs. 1,000
- B. Rs. 900
- 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.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Business Finance
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.
Practise Business Finance
975 free Business Finance MCQs from Management Sciences, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Management Sciences questions like this
Management Sciences is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Business Finance questions
A company has current assets of Rs. 500,000 and current liabilities of Rs. 250,000. What is its current ratio?
A project requires an initial investment of Rs. 1,000,000 and generates Rs. 600,000 at the end of each of the next two years. If the discount rate is 10%, what is the approximate net present value?
Working capital is commonly measured as:
Which of the following is an internal source of business finance?
Why does a higher proportion of debt in a company’s capital structure usually increase financial risk?