 # Present value of an annuity Determine 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 table in Exhibit 8. b. By using the present value table in Exhibit 10. c. Why is the present value of the four$200,000 cash receipts less than the $800,000 to be received in the future? BuyFind ### Accounting 27th Edition WARREN + 5 others Publisher: Cengage Learning, ISBN: 9781337272094 BuyFind ### Accounting 27th Edition WARREN + 5 others Publisher: Cengage Learning, ISBN: 9781337272094 #### Solutions Chapter Section Chapter 14, Problem 14.18EX 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 table in Exhibit 8.b. By using the present value table in Exhibit 10.c. Why is the present value of the four $200,000 cash receipts less than the$800,000 to be received in the future?

Expert Solution

(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 of Solution Calculate the present value of$200,000 (Future amount) by using present value table in Exhibit

 Calculation Present Value First Year $200,000×0.93458$186,916 Second Year $200,000×0 Expert Solution (b) To determine To calculate: The present value of$200,000 (Future amount) by using present value table in Exhibit 10.

Expert Solution

(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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