Question

Present and future value tables of $1 at 9% are presented below. 19 1 2 3.34 points PV of $1 0.91743 0 .84168 0.77218 0.70843 0.64993 0.59627 3 4 5 6 FV of $1 PVA of $1 1.090000 .91743 1.18810 1.75911 1.29503 2.53129 1.41158 3.23972 1.53862 3.88965 1.67710 4.48592 FVAD of $1 1.0900 2.2781 3.5731 4.9847 6.5233 . 8.2004 FVA of $1 1.0000 2.0900 3.2781 4.5731 5.9847 7.5233 8 00:48:48 Mustard's Inc. sold the rights to use one of its patented processes that will result in cash receipts of $3,800 at the end of each of the next five years and a lump sum receipt of $5,300 at the end of the sixth year. The total present value of these payments if interest is at 9% is: Multiple Choice 0 $17,941. 0 $21,581. 0 $14,781. $14,781. 0 $20,081.

Answer 1

Annual cash receipts for 5 years = $3,800

Cash receipt at the end of 6th year = $5,300

Present value annuity factor (9%,5) = 3.88965

Present value factor (9%,6) = 0.59627

Total present value of payment = Annual cash receipts for 5 years x Present value annuity factor (9%,5) + Cash receipt at the end of 6th year x Present value factor (9%,6)

= 3,800 x 3.88965 + 5,300 x 0.59627

= 14,780.67+3,160.23

= $17,941

First option is correct option.

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