Question

12. Present values What is the PV of $100 received in: a. Year 10 (at a discount rate of 1%)? b. Year 10 (at a discount rate of 13%)? c. Year 15 (at a discount rate of 25%)? d. Each of years 1 through 3 (at a discount rate of 12%)? T 0 11 1 dag inuntinin ona boring

Answer 1

Present Value = Future Value / ( 1 +Discount rate)^time period in years

Answer a)

Future Value = $100

Time = 10 years

Discount rate = 1%

PV = 100 / (1 + 1%)^10

PV = 100 / 1.1046

PV = $ 90.5287

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Answer b)

Future Value = $100

Time = 10 years

Discount rate = 13%

PV = 100 / (1 + 13%)^10

PV = 100 / 3.3946

PV = $ 29.4588

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Answer c)

Future Value = $100

Time = 15 years

Discount rate = 25%

PV = 100 / (1 + 25%)^15

PV = 100 / 28.4217

PV = $ 3.5184

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Answer d)

PV = 100 / (1 + 12%)^1 + 100 / (1 + 12%)^2 + 100 / (1 + 12%)^3

PV = 89.2857 + 79.7194 + 71.1780

PV = $ 240.1831

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