Use These Present Value Tables to Answer the Questions That

question 5

Multiple Choice

Use these present value tables to answer the questions that follow.
​
Below is a table for the present value of $1 at compound interest.
​
$$\begin{array} { c c c c } \text { Year } & 6 \% & 10 \% & 12 \% \\\hline 1 & 0.943 & 0.909 & 0.893 \\2 & 0.890 & 0.826 & 0.797 \\3 & 0.840 & 0.751 & 0.712 \\4 & 0.792 & 0.683 & 0.636 \\5 & 0.747 & 0.621 & 0.567\end{array}$$ Below is a table for the present value of an annuity of $1 at compound interest.
​
​​
$$\begin{array} { c c c c } \text { Year } & 6 \% & 10 \% & 12 \% \\\hline 1 & 0.943 & 0.909 & 0.893 \\2 & 1.833 & 1.736 & 1.690 \\3 & 2.673 & 2.487 & 2.402 \\4 & 3.465 & 3.170 & 3.037 \\5 & 4.212 & 3.791 & 3.605\end{array}$$
-Using the tables above, if an investment is made now for $20,000 that will generate a cash inflow of $7,000 a year for the next four years, what would be the present value of the investment cash inflows, assuming an earnings rate of 12%?

• A) $20,352
• B) $3,969
• C) $22,190
• D) $21,259

---

Definitions:

Temporal Method

An exchange rate conversion method that uses specific rates depending upon the timing of the original acquisition of assets and liabilities.

Total Assets

The sum of all resources owned by a company, including cash, investments, property, and other financial assets reflected on the balance sheet.

Cumulative Translation Gain

The total gain or loss resulting from the translation of foreign currencies into the functional currency over a period of time.

Consolidated Financial Statements

Financial statements that present the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries as a single entity.