Question

A company wants to have $20,000 at the end of a ten-year period by investing a single sum now. How much needs to be invested in order to have the desired sum in ten years, if the money can be invested at 12%? (Ignore income taxes.) Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.

Answer 1

Answer:

$6,439.56

Explanation:

The computation is shown below:

As we know that

Future value = Present Value × Future Value Interest Factor  

where,  

Future value interest factor = ( 1 + r )^10

= ( 1.12 )^10

= 3.1058

Now  

Present value of the future sum is

= $20,000 ÷ 3.1058

= $6,439.56