Compute the Present Value of the Following Single Amounts to Be

question 44

Short Answer

Compute the present value of the following single amounts to be received at the end of the specified period at the given interest rate.
$$\begin{array} { l c c c } \text { Item } & \begin{array} { c c c } \text { Invested } \\\text { Amount }\end{array} & \begin{array} { c } \text { Interest } \\\text { Rate }\end{array} & \begin{array} { c } \text { Number } \\\text { of } \\\text { Periods }\end{array} \\\hline\text { a. } & \$ 40,00 & 7 \% & 20 \\\text { b. } & \$ 20,000 & 6 \% & 25 \\\text { c. } & \$ 50,000 & 11 \% & 10\\\end{array}$$

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Definitions:

Total Contribution Margin

The difference between sales revenue and variable costs of production, indicating how much revenue contributes toward covering fixed costs and generating profit.

Pretax Income

The income a company generates before income taxes are deducted, also known as earnings before tax (EBT).

Variable Costing

An accounting method that only allocates variable costs to production, treating fixed costs as period costs that are charged to expense as they are incurred.

Fixed Overhead Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance, and must be paid regardless of the business activity level.