Question

What is the present value of $540,000 to be paid in 9 years? The annual interest rate is 7%. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answer to the nearest whole dollar.)

Answer 1

$293,724.22

Step-by-step explanation:

The present value of a single cash flow expected at a future date is its worth today if it is discounted at given rate or return.

This can be determined using the formula below:

PV = FV × (1+r)^(-n)

Where PV = Present Value, FV = Future Value, r - interest rate per period

n - number of periods

PV = $540,000 × (1.07)^(-9)

= $293,724.221

Present Value of $540,000 expected in year 9 = $293,724.22