   Chapter 11, Problem 11.9EX ### Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
ISBN: 9781337119207

#### Solutions

Chapter
Section ### Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
ISBN: 9781337119207
Textbook Problem

# Present value of an annuityDetermine the present value of $200,000 to be received at the end of each of four years, using an interest rate of 7%, compounded annually, as follows:A. By successive computations, using the present value of$1 table in Exhibit 5.B. By using the present value of an annuity of $1 table in Exhibit 7.C. why is the present value of the four$200,000 cash receipts less than the $800,000 to be received in the future? A. To determine Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value. To calculate: The present value of$200,000 (Future amount).

Explanation

Calculate the present value of $200,000 (Future amount) by using present value table in Exhibit 5.  Calculation Present Value First Year$200,000×0.93458 $186,916 Second Year$200,000×0

B.

To determine

To calculate: The present value of $200,000 (Future amount) by using present value table in Exhibit 7. C. To determine To explain: The reason why present value of four$200,000 cash receipts is less than \$800,000 to be received in future.

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