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

question 66

Multiple Choice

Present value of $1
Present value of an annuity of $1
$\begin{array}{|c|l|l|l|l|l|l|}\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \\\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \\\hline 2 & 0.925 & 0.890 & 0.857 & 0.826 & 0.797 & 0.769 \\\hline 3 & 0.889 & 0.840 & 0.794 & 0.751 & 0.712 & 0.675 \\\hline 4 & 0.855 & 0.792 & 0.735 & 0.683 & 0.636 & 0.592 \\\hline 5 & 0.822 & 0.747 & 0.681 & 0.621 & 0.567 & 0.519 \\\hline 6 & 0.790 & 0.705 & 0.630 & 0.564 & 0.507 & 0.456 \\\hline 7 & 0.760 & 0.665 & 0.583 & 0.513 & 0.452 & 0.400 \\\hline 8 & 0.731 & 0.627 & 0.540 & 0.467 & 0.404 & 0.351 \\\hline 9 & 0.703 & 0.592 & 0.500 & 0.424 & 0.361 & 0.308 \\\hline 10 & 0.676 & 0.558 & 0.463 & 0.386 & 0.322 & 0.270 \\\hline\end{array}$ $\begin{array}{|c|l|l|l|l|l|l|}\hline \text { Periods } & 4 \% & 6 \% & 8 \% & 10 \% & 12 \% & 14 \% \\\hline 1 & 0.962 & 0.943 & 0.926 & 0.909 & 0.893 & 0.877 \\\hline 2 & 1.886 & 1.833 & 1.783 & 1.736 & 1.690 & 1.647 \\\hline 3 & 2.775 & 2.673 & 2.577 & 2.487 & 2.402 & 2.322 \\\hline 4 & 3.630 & 3.465 & 3.312 & 3.170 & 3.037 & 2.914 \\\hline 5 & 4.452 & 4.212 & 3.993 & 3.791 & 3.605 & 3.433 \\\hline 6 & 5.242 & 4.917 & 4.623 & 4.355 & 4.111 & 3.889 \\\hline 7 & 6.002 & 5.582 & 5.206 & 4.868 & 4.564 & 4.288 \\\hline 8 & 6.733 & 6.210 & 5.747 & 5.335 & 4.968 & 4.639 \\\hline 9 & 7.435 & 6.802 & 6.247 & 5.759 & 5.328 & 4.946 \\\hline 10 & 8.111 & 7.360 & 6.710 & 6.145 & 5.650 & 5.216 \\\hline\end{array}$
-Refer to the Figure.Ramona Kruss is considering two investments.Each will cost $20,000 initially.Project 1 will return annual cash flows of $10,000 in each of three years.Project 2 will return $5,000 in year 1,$10,000 in year 2,and $15,000 in year 3.Ramona Kruss requires a minimum rate of return of 10%.What is the net present value of Project 1? (Note: there may be a rounding error depending on the table you use to compute your answer.Choose the answer closest to the result you calculate.)

• A)$2,530
• B)$4,860
• C)$20,000
• D)$22,530