Chapter A, Problem A.12BE

To determine

Annuity: The fixed amount paid or received in equal time periods is referred to as annuity.

Present value: This is the amount of future value reduced or discounted at a rate of interest till particular current date.

Formula to compute present value:

$\begin{array}{l}\text{Present}\\ \text{value}\end{array}\}\text{ = }\left\{\begin{array}{l}\text{Future value × }\\ \text{Present value factor of \$1 at interest rate for time periods}\end{array}\right\}$

To determine: The amount that K Enterprises invested to earn 5% rate of return