The present value of $100,000 to be received in five years at an interest rate o

Question

The present value of $100,000 to be received in five years at an interest rate of 16%, compounded annually, is $47,610. A discount rate of 20% is used. (Round pv factor to 4 decimal places, and the final answer to nearest whole dollar amount. Omit the "$" sign in your response.) Present value $ (e) The cash will be received in three years. (Round pv factor to 4 decimal places, and the final answer to nearest whole dollar amount. Omit the "$" sign in your response.) Present value $ (f) The cash will be received in seven years. (Round pv factor to 4 decimal places, and the final answer to nearest whole dollar amount. Omit the "$" sign in your response.) Present value $

Explanation / Answer

e) If the discount rate is 20% per annum effective and the time is three years then the present value should be:

pv = $100,000 / 1.20^3
.:
pv = $57,870.37

But using the tables,


pv = $100,000 * 0.5787
.:
pv = $57,870.00
===============

f) If the discount rate is 20% per annum effective and the time is seven years, then the present value should be:

pv = $27,908.16

But using the tables,

pv = $100,000 * 0.2791
.:
pv = $27,910.00

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