Question

PRINTER VERSION NACK NEXT Question 6 Cullumber Company is considering an investment that will return a lump sum of $520,000 years from now. What amount should Cullumber Company pay for this investment in order to earn a 6% return? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answer to 2 decimal places, e.g. 5,275.25.) Click here to view the factor table PRESENT VALUE OF L. Giochere to view the factor table PRESENT VALUE OF AN ANNUITY OF Amount to pay for this investment

Answer 1

Here, we need to find the presnet value of $520000. We will use the present value of $1 table as per below:

Present value = $520000 * PV (6%, 5 Years)

where, PV (6%, 5 Years) is the present value of $1 at 6% for 5 years. Its value from the table is 0.74726

putting the values in the above formula, we get,

Present value = $520000 * 0.74726

Present value = $388575.2

So, the amount that company should pay is $388575.2.