Answered: Pharoan Company will receive $395000 in…

Pharoan Company will receive $395000 in 7 years. If the appropriate interest rate is 9%, the present value of the $395000 receip O $722076. $217250. O $612250. O $216077

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 7P

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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

Pharoah Company will receive $395000 in 7 years. If the appropriate interest rate is 9%, the present value of the $395000 receipt is
$722076.
$217250.
$612250.
$216077.

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