Present and future value tables of $1 at 11% are presented below PV of $1 FV of

Question

Present and future value tables of $1 at 11% are presented below PV of $1 FV of $1 PVA of $1 FVA of $1 1 0.90090 1.11000 0.900901.0000 20.81162 1.23210 1.71252 2.1100 3 0.73119 1.36763 2.44371 3.3421 4 0.65873 1.51807 3.102454.7097 5 0.59345 1.68506 3.69590 6.2278 6 0.534641.87041 4.23054 7.9129 Spielberg Inc. signed a $130,000 noninterest-bearing note due in four years from a production company eager to do business. Comparable borrowings have carried an 11% interest rate, what is the value of this debt at its inception?

Explanation / Answer

Present value of outflows=outflows*Present value of discounting factor(rate%,time period)

=130,000/1.11^4

=$130,000*0.65873

which is equal to

=$85634.90(Approx).

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