COST ACCOUNTING
CAPITAL BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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$1.76
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$0.57
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$1.00
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$1.60
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Detailed explanation-1: -The present value formula is PV=FV/(1+i)n, where you divide the future value FV by a factor of 1 + i for each period between present and future dates. Input these numbers in the present value calculator for the PV calculation: The future value sum FV. Number of time periods (years) t, which is n in the formula.
Detailed explanation-2: -Answer and Explanation: The calculated present value of $100 to be paid in 2 years is $82.64.
Detailed explanation-3: -Following the 8% interest rate column down to the fifth period gives the present value factor of 0.68058. Multiply the $5, 000 future value times the present value factor of 0.68058 to get $3, 402.90. Remember, the present value will always be less that the future value because of interest.
Detailed explanation-4: -Answer and Explanation: The present value of $100 to be received in 3 years $75.13.