Present Value of an AnnuityDetermine the present value of $310,000 to be received at the end of each of four years, using an interest rate of 6%, compounded annually, as follows:a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar.First year$fill in the blank 1Second Year fill in the blank 2Third Year fill in the blank 3Fourth Year fill in the blank 4Total present value$fill in the blank 5b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar.$fill in the blank 6c. Why is the present value of the four $310,000 cash receipts less than the $1,240,000 to be received in the future?The present value is less due to..........................over the 4 years.

Calculation of present values is as follows; a) Year Cash receipts PV factor @ 6% Present value…

Answered: a. By successive computations, using…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Present Value of an Annuity

Determine the present value of $310,000 to be received at the end of each of four years, using an interest rate of 6%, compounded annually, as follows:

a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar.

First year	$fill in the blank 1
Second Year	fill in the blank 2
Third Year	fill in the blank 3
Fourth Year	fill in the blank 4
Total present value	$fill in the blank 5

b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar.
$fill in the blank 6

c. Why is the present value of the four $310,000 cash receipts less than the $1,240,000 to be received in the future?
The present value is less due to..........................over the 4 years.

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