Question

(Show computations) 1. Find the present value of $2,000,000 to be received in 10 years at 10%. 2. Find the present value of $50,000 per year for 20 years at 5%. 3. Find the present value of $50,000 per year for 20 years at 6%.

Answer 1

FORMULA

PV= FV ÷ (1 + i)ⁿ

i= interest rate

n= no.of years

Q1) PV= 20,00,000 / (1+.1)¹⁰

^=771086.6

Q2)PV OF 50000 RECEIVABLE FOR 20 YEARS DISCOUNTED @5%

50000	0.952381	47619.05
50000	0.907029	45351.47
50000	0.863838	43191.88
50000	0.822702	41135.12
50000	0.783526	39176.31
50000	0.746215	37310.77
50000	0.710681	35534.07
50000	0.676839	33841.97
50000	0.644609	32230.45
50000	0.613913	30695.66
50000	0.584679	29233.96
50000	0.556837	27841.87
50000	0.530321	26516.07
50000	0.505068	25253.4
50000	0.481017	24050.85
50000	0.458112	22905.58
50000	0.436297	21814.83
50000	0.415521	20776.03
50000	0.395734	19786.7
50000	0.376889	18844.47
	TOTAL	623110.5

Q3)

PV=PV OF 50000 RECEIVABLE FOR 20 YEARS DISCOUNTED @6%

50000	0.943396	47169.81
50000	0.889996	44499.82
50000	0.839619	41980.96
50000	0.792094	39604.68
50000	0.747258	37362.91
50000	0.704961	35248.03
50000	0.665057	33252.86
50000	0.627412	31370.62
50000	0.591898	29594.92
50000	0.558395	27919.74
50000	0.526788	26339.38
50000	0.496969	24848.47
50000	0.468839	23441.95
50000	0.442301	22115.05
50000	0.417265	20863.25
50000	0.393646	19682.31
50000	0.371364	18568.22
50000	0.350344	17517.19
50000	0.330513	16525.65
50000	0.311805	15590.24
	TOTAL	573496.1