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Present and future value tables of $1 at 9% are presented below
Present and future value tables of $1 at 9% are presented below.
Tap's Inc. sold the rights to use one of its patented processes that will result in cash receipts of $2,500 at the end of each of the next four years and a lump sum receipt of $4,000 at the end of the fifth year. The total present value of these payments if interest is at 9% is:
Question 13 options:
A)
$11,468.
B)
$14,000.
C)
$12,100.
D)
$10,699.
Expert Solution
| Computation of Present value | |||
| Year | Receipts | PV factor (9%) | Present Value |
| 1 | $2,500.00 | 0.91743 | $2,294 |
| 2 | $2,500.00 | 0.84168 | $2,104 |
| 3 | $2,500.00 | 0.77218 | $1,930 |
| 4 | $2,500.00 | 0.70843 | $1,771 |
| 5 | $4,000.00 | 0.64993 | $2,600 |
| Total |
$10,699
|
So, the correct option is D "$10,699".
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