Below is a table for the present value of $1 at Compound interest. Below is a ta

Question

Below is a table for the present value of $1 at Compound interest.

Below is a table for the present value of an annuity of $1 at compound interest.

Using the tables above, determine the present value of $5,033.00 (rounded to the nearest dollar) to be received at the end of each of the next 3 years, assuming an earnings rate of 10%.

Select the correct answer.

$4,530

Below is a table for the present value of $1 at Compound interest.

Below is a table for the present value of an annuity of $1 at compound interest.

Using the tables above, if an investment is made now for $21,672.00 that will generate a cash inflow of $2,600.64 a year for the next 4 years, what would be the net present value (rounded to the nearest dollar) of the investment, (assuming an earnings rate of 12%)?

Select the correct answer.

Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567

Explanation / Answer

1) $   12,517 Working: Present value of annuity = Annuity x Present Value of annuity of $1 @10% = $ 5,033 x 2.487 = $ 12,517 2) $ -13,774 Working: Present Value of cash inflows = Cash inflow x Present value of annuity of $1 = $ 2,600.64 x 3.037 = $ 7,898 Present Value of cash inflows $ 7,898 Less:Inestment $ 21,672 Net Present Value $            -13,774

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