Using the Following Table, What Is the Present Value of $40,000

question 45

Short Answer

Using the following table, what is the present value of $40,000 to be received in 5 years, if the market rate is 7% compounded annually? $$\begin{array} { | l | c | c | c | c | } \hline \text { Periods } & 5 \% & 6 \% & 7 \% & 10 \% \\\hline 1 & 0.95238 & 0.94340 & 0.93458 & 0.90909 \\\hline 2 & 0.90703 & 0.89000 & 0.87344 & 0.82645 \\\hline 3 & 0.86384 & 0.83962 & 0.81630 & 0.75132 \\\hline 4 & 0.82270 & 0.79209 & 0.76290 & 0.68301 \\\hline 5 & 0.78353 & 0.74726 & 0.71299 & 0.62092 \\\hline 6 & 0.74622 & 0.70496 & 0.66634 & 0.56447 \\\hline 7 & 0.71068 & 0.66506 & 0.62275 & 0.51316 \\\hline 8 & 0.67684 & 0.62741 & 0.58201 & 0.46651 \\\hline 9 & 0.64461 & 0.59190 & 0.54393 & 0.42410 \\\hline 10 & 0.61391 & 0.55840 & 0.50835 & 0.38554 \\\hline\end{array}$$

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Definitions:

Average-cost Pricing

Average-cost pricing is a pricing strategy where the price is set based on the average cost of production, including fixed and variable costs, plus a markup.

Regulated Natural Monopolist

A company that legally operates a monopoly because it is more efficient to have a single provider of a service or good, but its operations and pricing are supervised by the government to prevent abuse.

Social Well-being

Refers to the overall quality of life and level of happiness and fulfillment experienced by individuals within a society.

Deregulating

The process of reducing or eliminating government regulations on industries to foster a more efficient and competitive business environment.