Use These Present Value Tables to Answer the Questions That

question 166

Multiple Choice

Use these present value tables to answer the questions that follow.
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Below is a table for the present value of $1 at compound interest.
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$$\begin{array} { c c c c } \text { Year } & 6 \% & 10 \% & 12 \% \\\hline 1 & 0.943 & 0.909 & 0.893 \\2 & 0.890 & 0.826 & 0.797 \\3 & 0.840 & 0.751 & 0.712 \\4 & 0.792 & 0.683 & 0.636 \\5 & 0.747 & 0.621 & 0.567\end{array}$$ Below is a table for the present value of an annuity of $1 at compound interest.
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$$\begin{array} { c c c c } \text { Year } & 6 \% & 10 \% & 12 \% \\\hline 1 & 0.943 & 0.909 & 0.893 \\2 & 1.833 & 1.736 & 1.690 \\3 & 2.673 & 2.487 & 2.402 \\4 & 3.465 & 3.170 & 3.037 \\5 & 4.212 & 3.791 & 3.605\end{array}$$
-Using the tables above, if an investment is made now for $23,500 that will generate a cash inflow of $8,000 a year for the next four years, what would be the net present value of the investment, assuming an earnings rate of 10%?

• A) $23,500
• B) $16,050
• C) $25,360
• D) $1,860

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