Brief Exercise 1014 a what is the present value of 18020 due

Brief Exercise 10-14 (a) what is the present value of $18,020 due 6 periods from now, discounted at 12%? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. $8,970.50.) The present value of $18,020 s (b) what is the present value of $19,640 to be received at the end of each of 7 periods, discounted at 10%? (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 2 decimal places e.g. $8,970.50.) The present value of $19,640

Solution

a.Present value=$18020*Present value of discounting factor(12%,6)

=$18020/1.12^6

=$18020*0.50663

=$9129.47(Approx).

b.

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=$19640[1-(1.1)^-7]/0.1

=$19640*4.86842

=$95615.77(Approx).