**Educational Content: Present Value Calculation****Context:** Incognito Company is considering the acquisition of a machine that is expected to generate cash savings of $93,000 annually for five years. The applicable interest rate is 11%, and it is assumed that these cash savings will occur at the end of each year.**Task:** Calculate the present value of these future cash savings.**Instructions:** - Use financial tables, Excel, or a financial calculator to compute the present value.- Round your final answer to the nearest whole dollar. **Helpful Links for Calculations:** - Future Value of $1 (FV of $1)- Present Value of $1 (PV of $1)- Future Value Annuity of $1 (FVA of $1)- Present Value Annuity of $1 (PVAD of $1)**Visual Aid:** A box is provided for inputting the calculated present value.By following these steps, you can determine the current worth of the anticipated cash savings, helping Incognito Company make an informed investment decision.

The present value (PV) calculation determines the current worth of a future stream of cash flows, discounted at a specific interest rate. In this case, we'll calculate the PV of annual cash savings of $93,000 for five years at an 11% interest rate.We need to find the present value of Incognito Company's annual cash savings of $93,000 for five years, discounted at an 11% interest rate. This involves using the formula for the present value of an annuity, as the cash savings occur at regular intervals (annually) and are of equal amounts.Formula for Present Value of an Annuity:PV = P * [(1 - (1 + r)^-n) / r]Where P = Annual cash savings, r = Annual interest rate, n = Number of years.Values:P (Annual cash savings) = $93,000r (Annual interest rate) = 11% or 0.11n (Number of years) = 5Calculation Steps:First, calculate (1 + r)^-n: (1 + 0.11)^-5 = 0.59345Next, compute the fraction: (1 - 0.59345) / 0.11 = 3.6959Finally, multiply by P: $93,000 * 3.6959 = $343,678.70The present value of $93,000 per year for five years at an 11% interest rate is $343,678.70.

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Incognito Company is contemplating the purchase of a machine that provides it with cash savings of $93,000 per year for five years. Interest is 11%. Assume the cash savings.occur at the end of each year. Required: Calculate the present value of the cash savings. Note: Use tables, Excel, or a financial calculator. Round your final answer to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Present value

Incognito Company is contemplating the purchase of a machine that provides it with cash savings of $93,000 per year for five years. Interest is 11%. Assume the cash savings.occur at the end of each year. Required: Calculate the present value of the cash savings. Note: Use tables, Excel, or a financial calculator. Round your final answer to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Present value

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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