Answer:
a. PV = $10,299.02
b. PV = $36,226.63
c. PV = $14,797.46
d. PV = $24,794.88
Explanation:
To solve this question, we use present value formula
PV = C/(1+r)^n
Where PV = Present value of a lump sum
C = Future amount to be discounted
r = Interest rate
n = Number of years
a. PV = C/(1+r)^n
C = $25,500
r = 12%
n = 8
PV = $25,500 /(1+12%)^8
PV = $25,500 /(1+0.12)^8
PV = $25,500 /(1.12)^8
PV = $25,500 /2.475963176
PV = $10,299.02231
PV = $10,299.02
b. PV = C/(1+r)^n
C = $58,000
r = 4%
n = 12
PV = $58,000 /(1+4%)^12
PV = $58,000 /(1+0.04)^12
PV = $58,000 /(1.04)^12
PV = $58,000 /1.601032219
PV = $36,226.62888
PV = $36,226.63
c. PV = C/(1+r)^n
C = $25,000
r = 6%
n = 9
PV = $25,000 /(1+6%)^9
PV = $25,000 /(1+0.06)^9
PV = $25,000 /(1.06)^9
PV = $25,000 /1.689478959
PV = $14,797.46159
PV = $14,797.46
c. PV = C/(1+r)^n
C = $35,000
r = 9%
n = 4
PV = $35,000 /(1+9%)^4
PV = $35,000 /(1+0.09)^4
PV = $35,000 /(1.09)^4
PV = $35,000 /1.41158161
PV = $24,794.88239
PV = $24,794.88
