1. Because of the time value of money, a company would prefer to receive a payment due to them: Select one: A. As early as possible B. As late as possible C. It does not make a difference when the payment is received D. It depends on the discount rate E. None of the above 2. Which of the following items are impacted by taxes when considering Net Present Value? Select one: A. Cash receipts from future sales B. Depreciation expense C. Cash outlays for future expenses D. Cash receipts for disposal of fully-depreciated assets E. All of the above 3. Which of the following items are impacted by taxes when considering Net Present Value? Select one: A. Cash receipts from future sales B. Depreciation expense C. Cash outlays for future expenses D. Cash receipts for disposal of fully-depreciated assets E. All of the above Solution 1. According to the concept of time value of money, $1 today will be worth somewhat more than $1 an year later. So, suppose if the company has a receivable of $100 and it has the option of whether to receive the payment today or an year later, then the Company would choose receiving payment today because $100 received today will earn it the prevalant interest rate and will be worth more than $100 an year later. So, the correct answer is - (A) As early as possible 2. Cash receipts from Future Sales will result in additional tax liability for the company and thus is impacted by tax. Depreciation expense is an allowable deduction while computing taxable profits and hence helps in tax savings. Thus, depreciation expense is also impacted by tax. Cash outlay for Future Expenses results in reduction of tax liability. Thus, it is also impacted by tax. When a fully depreciated asset is sold, then the entire receipt is taxable income and will lead to increase in tax liability. Thus, it is also impacted by tax. Therefore, the correct answer is - (E) All of the above 3. Cash receipts from Future Sales will result in additional tax liability for the company and thus is impacted by tax. Depreciation expense is an allowable deduction while computing taxable profits and hence helps in tax savings. Thus, depreciation expense is also impacted by tax. Cash outlay for Future Expenses results in reduction of tax liability. Thus, it is also impacted by tax. When a fully depreciated asset is sold, then the entire receipt is taxable income and will lead to increase in tax liability. Thus, it is also impacted by tax. Therefore, the correct answer is - (E) All of the above.

1. 1.The existence of money makes trade easier. How is it that money can also increase the
standard of living? 2. Why is the Chairman of the Federal Reserve often referred to as the
"second most powerful person in the United States?"
Solution
1. Before the introduction of money, there existed barter system in which people used to
exchange goods and services directly in exchange for other goods and services. In this system
there was no medium of exchange involved. But this system has its limitations. For example, if a
local blacksmith needs two loaves of bread, but if the baker needs plumbing services instead of
new shoes for her horse, the blacksmith must find a plumber who needs new tools to make the
trade. Currency system eliminated such limitations. It involved an agreed-upon form of paper or
coin money as an exchange system instead of directly exchanging goods and services through
barter. With the development of currency system in economies, governments created paper notes
and coins which encouraged trade. In this way the existence of money made trade easier.
Standard of living of a person is reflected by the goods and services that he/she purchases. It is
also related with the wealth and comfort and the availability of the necessities to a person. A
person with sufficient amount of money can have access to superior quality of goods and
services and will also be less worried about the financial issues. One can easily buy the things
that he/she wishes to buy with the help of money and can also also spend more money on
improving themselves and thus enjoys a higher standard of living. In this way money plays an
important role in increasing the standard of living.
2) The Federal Reserve is responsible for regulating the US banking system and directing
monetary policy - namely, by setting the short-term interest rates that banks charge each other, a
key factor in loosening or restricting the flow of credit to businesses, individuals, and other
borrowers. It aims to set rates at a level that strikes the right balance between inflation and
employment, keeping the economy on an even ground and not running too hot or cold. The
chairman of Federal Reserve is often referred to as the "second most powerful person in the
United States" because he is the one who holds meetings and sets the rate for treasury bills. The
monetary system in United States is very much dependent on treasury bills. Monetary system
involves debt, taxes, currency, etc. which drives the entire economy. The chairman of Federal
Reserve in consultation with other members sets the prime interest rate which is the basis for all
private debt in the U.S., consumer credit card, debt, mortgages, car loans. So you can see that a
minor change up or down can effect your monthly payments significantly. Such decisions have a
direct bearing on our income. Things like how much we can save or how much extra we have to
spend depends on the decisions of the chairman of the Federal Reserve. Our lives are so much

2. affected by such decisions. The chairman is not elected by the people but is appointed by the
President of the United States. The decisions of the chairman plays an important role in the
growth of the economy. Also, the financial world hangs on a Fed chair’s every word, since they
speak for the world’s most important central bank and set policy that affects the global reserve
currency.