Which of the following is a correct statement regarding the variables in compound interest problems?

a. The present value is the value now (present time) for a future sum or sums discounted assuming compound interest.

b. The future value is the value at a future date of a given sum or sums invested assuming simple interest.

c. The rate of interest is a semi-annual rate that must be adjusted, if necessary, to the length of the compounding period.

d. The number of time periods is the number of compounding periods where each period may be equal to or greater than a year.

Star Company has average annual income before taxes of $120,000 on a project that cost $400,000 and a $200,000 residual value. With a tax rate of 40%, the accounting rate of return would be:

a. 30%

b. 24%

c. 26%

d. 40%

e. 36%

Manasas Steak House is evaluating a capital expenditure proposal with the following predicted cash flows: Initial investment ............................................... $40,000 Operations, each year for four years................. 15,000 Residual value .................................................. 5,000 At a discount rate of 12 percent, the projects net present value is:

a. $5,560.

b. $2,382.

c. $8,738

d. $48,738