Present value of an annuity Determine the present value of $320,000 to be received at the end of each of 4 years, using an interest rate of 10%, compounded annually, as follows: a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar. First year Second Year Third Year Fourth Year Total present value b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar. c. Why is the present value of the four $320,000 cash receipts less than the $1,280,000 to be received in the future? The present value is less due to the compounding of interest over the 4 years.

Present value of an annuity Determine the present value of $320,000 to be received at the end of each of 4 years, using an interest rate of 10%, compounded annually, as follows: a. By successive computations, using the present value of $1 table in Exhibit 5. Round to the nearest whole dollar. First year Second Year Third Year Fourth Year Total present value b. By using the present value of an annuity of $1 table in Exhibit 7. Round to the nearest whole dollar. c. Why is the present value of the four $320,000 cash receipts less than the $1,280,000 to be received in the future? The present value is less due to the compounding of interest over the 4 years.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA3: Time Value Of Money

Section: Chapter Questions

Problem 12E

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