Exercise 11A-2 Basic Present Value Concepts [LO5] You have just learned that you

Question

Exercise 11A-2 Basic Present Value Concepts [LO5]

You have just learned that you are a beneficiary in the will of your late Aunt Susan. The executrix of her estate has given you three options as to how you may receive your inheritance.

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Calculate the present value for the following assuming that the money can be invested at 14% percent. (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

You have just learned that you are a beneficiary in the will of your late Aunt Susan. The executrix of her estate has given you three options as to how you may receive your inheritance.

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

You have just learned that you are a beneficiary in the will of your late Aunt Susan. The executrix of her estate has given you three options as to how you may receive your inheritance. Calculate the present value for the following assuming that the money can be invested at 14% percent.

Explanation / Answer

Hi

Please find the answer as follows:

Part A:

Present Value = 60000 (since the value of received today itself)

Part B:

Present Value = 83000*PVIF(14%, 13 Years) = 83000*.182 = 15106

Part C:

Present Value = 17000*PVIFA(14%, 13 Years) = 17000*5.842 = 99314

Thanks.

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