Answered: What is the present value on January 1,…

What is the present value on January 1, 2016, of $40,000 to be received on January 1, 2019, and discounted 8% compounded annually? Round answer to two decimal places.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA3: Time Value Of Money

Section: Chapter Questions

Problem 3CE

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

What is the present value on January 1,
2016, of $40,000 to be received on January
1, 2019, and discounted 8% compounded
annually? Round answer to two decimal
places.

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