Present Value Tables
Present Value of $1 Present Value of an Annuity of $1

question 131

Multiple Choice

Present Value Tables
Present value of $1 $$\begin{array} { l l l l l l l } \text { Periads } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \\1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \\2 & 0.925 & 0.890 & 0.857 & 0.826 & 0.797 & 0.769 \\3 & 0.889 & 0.840 & 0.794 & 0.751 & 0.712 & 0.675 \\4 & 0.855 & 0.792 & 0.735 & 0.683 & 0.636 & 0.592 \\5 & 0.822 & 0.747 & 0.681 & 0.621 & 0.567 & 0.519 \\6 & 0.790 & 0.705 & 0.630 & 0.564 & 0.507 & 0.456 \\7 & 0.760 & 0.665 & 0.583 & 0.513 & 0.452 & 0.400 \\8 & 0.731 & 0.627 & 0.540 & 0.467 & 0.404 & 0.351 \\9 & 0.703 & 0.592 & 0.500 & 0.424 & 0.361 & 0.308 \\10 & 0.676 & 0.558 & 0.463 & 0.386 & 0.322 & 0.270\end{array}$$ Present value of an annuity of $1 $$\begin{array} { l l l l l l l } \text { Periads } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \\1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \\2 & 1.886 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 \\3 & 2.775 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 \\4 & 3.630 & 3.465 & 3.312 & 3.170 & 3.037 & 2.914 \\5 & 4.452 & 4.212 & 3.993 & 3.791 & 3.605 & 3.433 \\6 & 5.242 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 \\7 & 6.002 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 \\8 & 6.733 & 6.210 & 5.747 & 5.335 & 4.968 & 4.639 \\9 & 7.435 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 \\10 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216\end{array}$$
-Refer to Present Value Tables. Cinnamon Company is considering an investment in new imaging equipment that will cost $400,000. The equipment is expected to yield cash inflows of $80,000 per year for a six-year period. The company has set a required rate of return at 10%. What is the net present value of the investment?

• A) ($348,600)
• B) ($51,600)
• C) $51,600
• D) $348,400

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Definitions:

Low-margin Business

A business that operates with a small difference between the cost to produce goods or services and the selling price, resulting in low profit margins.

Adding Capacity

The process of increasing the potential output of a business to meet expected demand.

Leadership

The act of guiding or influencing a group towards achieving its goals, often involving making strategic decisions, motivating individuals, and fostering teamwork.

Authority

The power or right to give orders, make decisions, and enforce obedience, often associated with positions of leadership or governance.