What is the present value on January 1, 2019, of $30,000 due on January 1, 2023, and discontinued at 10% compounded annually? What is the present value on January 1, 2019, of $40,000 due on January 1, 2023, and discontinued at 11% compounded semiannually?

What is the present value on January 1, 2019, of $30,000 due on January 1, 2023, and discontinued at 10% compounded annually? What is the present value on January 1, 2019, of $40,000 due on January 1, 2023, and discontinued at 11% compounded semiannually?

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money

Section: Chapter Questions

Problem 9.16E

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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

Present Valie computations

What is the present value on January 1, 2019, of $30,000 due on January 1, 2023, and discontinued at 10% compounded annually?

What is the present value on January 1, 2019, of $40,000 due on January 1, 2023, and discontinued at 11% compounded semiannually?

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