Which has a greater present value, a future value of $300,000 received in year 6, or an end-of-the-year annuity (first cash flow exactly one year from today) of $75,000 that lasts for four years if the relevant interest rate is 0%?
A) The future value of $300,000 is preferred.
B) The annuity has a greater present value.
C) You are indifferent to these two sets of cash flows on a present value basis.
D) You can't properly answer this question because the interest rate is 0%.
C
Explanation: C) Because the interest rate is 0%, the present values are equal.
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When answering requests and a potential sale is involved, one important goal is to
A) leave your audience with a good impression of you and your firm. B) provide negative information about any possible competitors. C) use hard sell techniques to pressure the reader into making the purchase. D) explain the flaws in competitors' products. E) include a deadline to encourage more frequent sales.