Question

Ted Roberts has been offered the following future ​payments n​ years from today. If his opportunity cost is i​, compounded​ annually, what value would he place on each​ opportunity?  

Future Value​ ($)	Interest Rate​ (%)	Years	Present   Value​ ($)
8,700	6	11
5,800	8	25

Future Value $	Interest Rate %	Years Present value
6,300	16	27
2,900	12	19

What is the Present Value?

Answer 1

1)

Present value = Future value / (1 + r)ⁿ

Present value = 8,700 / (1 + 0.06)¹¹

Present value = 8,700 / 1.898299

Present value = $4,583.05

2)

Present value = Future value / (1 + r)ⁿ

Present value = 5,800 / (1 + 0.08)²⁵

Present value = 5,800 / 6.848475

Present value = $846.90

3)

Present value = Future value / (1 + r)ⁿ

Present value = 6,300 / (1 + 0.16)²⁷

Present value = 6,300 / 55.000382

Present value = $114.54

4)

Present value = Future value / (1 + r)ⁿ

Present value = 2,900 / (1 + 0.12)¹⁹

Present value = 2,900 / 8.612762

Present value = $336.71