i, MindTap-Cengage Learning C To Find The Present Value of A X https://ng.cengag
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i, MindTap-Cengage Learning C To Find The Present Value of A X https://ng.cengage.com/static/nb/ui/evo/index.html?deploymentld-58328428931316937652116.. t MINDTAP Search this course Niko From Cengage Ch 05: Assignment - Time Value of Money Lexi and Luke are walking after class between the library and the best pizzeria near campus. They're discussing Dr Smith's latest financial management lecture, which addressed the concept of present value and the process for calculating it. In anticipation of tomorrow's quiz, they've decided to review their lecture notes and the textbook materials and then practice one or two problems. Complete the missing information in the conversation that follows. Round your final answer to all computations to two decimal places. However, if you compute any interest factors as an intermediate step in your calculations, round them to four decimal places. Luke So, what is a present value, and why is it important to be able to calculate it? Lexi According to Dr. Smith, an asset's present or discounted value is the current value of the cash flows that it will pay or receive in the future. Luke Wait! Can you give me an example of when it would be appropriate to calculate a present value? Lexi Sure, but it might make more sense for you to identify such a situation. So, tell me in which of the following two scenarios you would use a present value calculation, and then explain why that is S0. Scenario 1: You would like to know how much you should place on deposit to have accumulated a certain amount of money by a specific future date Scenario 2: You would like to know how much a given amount deposited today will grow into by a specific future date Luke Ummm. I think is the situation that requires the calculation of a present value The reason is that the amount to be placed on deposit is both and occurs Lexi Very good! So here's your next question: How is the present value of a single amount calculated?Explanation / Answer
1. Discounted. As it is the process to calculate current value of any future cash flow
2. Scenrio 1, as it is the situation where we need to calculate the current value of future sum of amount
3. Needs to be discounted and occurs today
4.FV= PV*(1+r)^n as this is the formula for future value calculation
5 dividing both side by (1+r)^n
6 Reciprocal . As for calculation PV we multiply the FV by 1/(1+r)^n
7. Present Value, as this is what we need to calculate
8. PV=FV/(1+r)^n
=15000/(1.11^3)
= $10967.87
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