The present value of $40,000 to be received in two years, at 12% compounded annually, isPresent Value of $1 at Compound InterestPeriods12346789105%0.952380.907030.822700.783530.746220.89000 0.873440.86384 0.83962 0.816300.79209 0.762900.747260.710680.676840.644610.61391a. $40,000Ob. $48,112Oc. $8,112Od. $31,8886%0.943407%0.934580.704960.7129910%0.909090.826450.751320.683010.620920.66634 0.564470.66506 0.62275 0.513160.62741 0.582010.466510.591900.543930.55840 0.50835 0.385540.4241012%0.892860.797190.711780.635520.567430.506630.452350.403880.360610.32197(rounded to nearest dollar). Use the following table, if needed.

According to the concept of present value the value of money decreases each year , thus the value of…

The present value of $40,000 to be received in two years, at 12% compounded annually, is Present Value of $1 at Compound Interest Periods 1 2 3 4 5 6 7 8 9 10 12% 0.95238 0.94340 0.93458 0.90909 0.89286 0.90703 0.89000 0.87344 0.82645 0.79719 0.86384 0.83962 0.81630 0.75132 0.71178 0.82270 0.79209 0.76290 0.68301 0.63552 0.78353 0.74726 0.71299 0.62092 0.56743 0.74622 0.70496 0.66634 0.56447 0.50663 0.66506 0.62275 0.51316 0.45235 0.67684 0.62741 0.58201 0.40388 0.64461 0.59190 0.54393 0.42410 0.36061 0.61391 0.55840 0.50835 0.38554 0.32197 5% 0.71068 a. $40,000 Ob. $48,112 OC. $8,112 d. $31,888 6% 7% 10% 0.46651 (rounded to nearest dollar). Use the following table, if needed.

The present value of $40,000 to be received in two years, at 12% compounded annually, is Present Value of $1 at Compound Interest Periods 1 2 3 4 5 6 7 8 9 10 12% 0.95238 0.94340 0.93458 0.90909 0.89286 0.90703 0.89000 0.87344 0.82645 0.79719 0.86384 0.83962 0.81630 0.75132 0.71178 0.82270 0.79209 0.76290 0.68301 0.63552 0.78353 0.74726 0.71299 0.62092 0.56743 0.74622 0.70496 0.66634 0.56447 0.50663 0.66506 0.62275 0.51316 0.45235 0.67684 0.62741 0.58201 0.40388 0.64461 0.59190 0.54393 0.42410 0.36061 0.61391 0.55840 0.50835 0.38554 0.32197 5% 0.71068 a. $40,000 Ob. $48,112 OC. $8,112 d. $31,888 6% 7% 10% 0.46651 (rounded to nearest dollar). Use the following table, if needed.

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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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

The present value of $40,000 to be received in two years, at 12% compounded annually, is
Present Value of $1 at Compound Interest
Periods
1
2
3
4
6
7
8
9
10
5%
0.95238
0.90703
0.82270
0.78353
0.74622
0.89000 0.87344
0.86384 0.83962 0.81630
0.79209 0.76290
0.74726
0.71068
0.67684
0.64461
0.61391
a. $40,000
Ob. $48,112
Oc. $8,112
Od. $31,888
6%
0.94340
7%
0.93458
0.70496
0.71299
10%
0.90909
0.82645
0.75132
0.68301
0.62092
0.66634 0.56447
0.66506 0.62275 0.51316
0.62741 0.58201
0.46651
0.59190
0.54393
0.55840 0.50835 0.38554
0.42410
12%
0.89286
0.79719
0.71178
0.63552
0.56743
0.50663
0.45235
0.40388
0.36061
0.32197
(rounded to nearest dollar). Use the following table, if needed.

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