An investor has asked for your help with the following time value of money applications. Table 6-4. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Required: a. What is the present value of $62,000 to be received in six years using a discount rate of 18%? (Round your answer to 1 decimal place.) Present value b. How much should be invested today at a return on investment of 18% compounded annually to have $62,000 in six years? (Round your answer to 1 decimal place.) Amount to be invested c. If the return on investment was greater than 18% compounded annually, would the amount to be invested today to have $62,000 in six years be more or less than the answer to part b? O More O Less
An investor has asked for your help with the following time value of money applications. Table 6-4. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Required: a. What is the present value of $62,000 to be received in six years using a discount rate of 18%? (Round your answer to 1 decimal place.) Present value b. How much should be invested today at a return on investment of 18% compounded annually to have $62,000 in six years? (Round your answer to 1 decimal place.) Amount to be invested c. If the return on investment was greater than 18% compounded annually, would the amount to be invested today to have $62,000 in six years be more or less than the answer to part b? O More O Less
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:An investor has asked for your help with the following time value of money applications. Table 6-4. (Use appropriate factor(s) from the
tables provided. Round the PV factors to 4 decimals.)
Required:
a. What is the present value of $62,000 to be received in six years using a discount rate of 18%? (Round your answer to 1 decimal
place.)
Present value
b. How much should be invested today at a return on investment of 18% compounded annually to have $62,000 in six years? (Round
your answer to 1 decimal place.)
Amount to be invested
c. If the return on investment was greater than 18% compounded annually, would the amount to be invested today to have $62,000 in
six years be more or less than the answer to part b?
O More
O Less
Transcribed Image Text:TABLE 6.4
FACTORS FOR CALCULATING THE PRESENT VALUE OF $1
Discount Rate
No. of
Periods
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1
0.980
0.9615
0.9434
0.9259
0.9091
0.8929
0.8772
0.8621
0.8475
0.8333
0.961
0.9246
0.8900
0.8573
0.8264
0.7972
0.7695
0.7432
0.7182
0.6944
0.942
0.8890
0.8396
0.7938
0.7513
0.7118
0.6750
0.6407
0.6086
0.5787
4
0.924
0.8548
0.7921
0.7350
0.6830
0.6355
0.5921
0.5523
0.5158
0.4823
0.906
0.8219
0.7473
0.6806
0.6209
0.5674
0.5194
0.4761
0.4371
0.4019
0.888
0.7903
0.7050
0.6302
0.5645
0.5066
0.4556
0.4104
0.3704
0.3349
7
0.871
0.7599
0.6651
0.5835
0.5132
0.4523
0.3996
0.3538
0.3139
0.2791
8
0.853
0.7307
0.6274
0.5403
0.4665
0.4039
0.3506
0.3050
0.2660
0.2326
9
0.837
0.7026
0.5919
0.5002
0.4241
0.3606
0.3075
0.2630
0.2255
0.1938
10
0.820
0.6756
0.5584
0.4632
0.3855
0.3220
0.2697
0.2267
0.1911
0.1615
11
0.804
0.6496
0.5268
0.4289
0.3505
0.2875
0.2366
0.1954
0.1619
0.1346
12
0.788
0.6246
0.4970
0.3971
0.3186
0.2567
0.2076
0.1685
0.1372
0.1122
13
0.773
0.6006
0.4688
0.3677
0.2897
0.2292
0.1821
0.1452
0.1163
0.0935
14
0.758
0.5775
0.4423
0.3405
0.2633
0.2046
0.1597
0.1252
0.0985
0.0779
15
0.743
0.5553
0.4173
0.3152
0.2394
0.1827
0.1401
0.1079
0.0835
0.0649
16
0.728
0.5339
0.3936
0.2919
0.2176
0.1631
0.1229
0.0930
0.0708
0.0541
17
0.714
0.5134
0.3714
0.2703
0.1978
0.1456
0.1078
0.0802
0.0600
0.0451
18
0.700
0.4936
0.3503
0.2502
0.1799
0.1300
0.0946
0.0691
0.0508
0.0376
19
0.686
0.4746
0.3305
0.2317
0.1635
0.1161
0.0829
0.0596
0.0431
0.0313
20
0.673
0.4564
0.3118
0.2145
0.1486
0.1037
0.0728
0.0514
0.0365
0.0261
21
0.660
0.4388
0.2942
0.1987
0.1351
0.0926
0.0638
0.0443
0.0309
0.0217
22
0.647
0.4220
0.2775
0.1839
0.1228
0.0826
0.0560
0.0382
0.0262
0.0181
23
0.634
0.4057
0.2618
0.1703
0.1117
0.0738
0.0491
0.0329
0.0222
0.0151
24
0.622
0.3901
0.2470
0.1577
0.1015
0.0659
0.0431
0.0284
0.0188
0.0126
25
0.610
0.3751
0.2330
0.1460
0.0923
0.0588
0.0378
0.0245
0.0160
0.0105
30
0.552
0.3083
0.1741
0.0994
0.0573
0.0334
0.0196
0.0116
0.0070
0.0042
35
0.500
0.2534
0.1301
0.0676
0.0356
0.0189
0.0102
0.0055
0.0030
0.0017
40
0.453
0.2083
0.0972
0.0460
0.0221
0.0107
0.0053
0.0026
0.0013
0.0007
45
0.410
0.1712
0.0727
0.0313
0.0137
0.0061
0.0027
0.0013
0.0006
0.0003
50
0.372
0.1407
0.0543
0.0213
0.0085
0.0035
0.0014
0.0006
0.0003
0.0001
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