Exercise 11A-2 Basic Present Value Concepts [LO5] You have just learned that you
ID: 2505278 • Letter: E
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 11% percent.(Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)
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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.
Explanation / Answer
Calculate the present value for the following assuming that the money can be invested at 11% percent.(Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)
Working:
present value :
a) You may receive $59,000 immediately = $ 59000
b) You may receive $82,000 at the end of five years. = 82000*PVIF(11%,5)
You may receive $82,000 at the end of five years. = 82000*0.593
You may receive $82,000 at the end of five years. = 48,626
c) You may receive $16,000 at the end of each year for five years = 16000*PVIFA(11%,5)
You may receive $16,000 at the end of each year for five years = 16000*3.696
You may receive $16,000 at the end of each year for five years = 59,136
1-a.Calculate the present value for the following assuming that the money can be invested at 11% percent.(Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)
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