Question

The present value of $200 to be received 5 years from today, assuming an opportunity cost of 8 percent, is $136 $200 $294 $40

Answer 1

Answer.  $ 136.

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

Where

r = Discount rate/ opportunity cost

n = period

Therefore

Present value = $ 200/(1+.08)^5

= $ 200/(1.08)^5

= $ 136.11

Or

= $ 136

Alternatively

pv= cashflow at the end of 5 years x PVIF(r,n)

Pv = $200 x PVIF(8%,5 years)

pv = $200 x .680

PV = $ 136