Lora is going to receive $10,000 a year at the end of each of the next five years from her education cost.

Lora is going to receive $10,000 a year at the end of each of the next five years from her education cost. using a discount rate of 14% the present value of the receipts can be stated as:

a. annuity FV factor, i=14%, n=5

b. PV factor i=14% ,n=5

c. annuity PV factor, i=14%, n=5

d. FV factor, i=14%, n=5

Expert Solution

C) PV = $10,000 (Ordinary Annuity PV factor i=14%,n=15)

Explanation:

For Calculating the Present Value: For a Receipt of 10,000 For Each year Present Value of Ordinary Annuity will be Used to.

For a single Receipt, we can use the PV Factor.

Formulas For PVA Factor = (((1-((1/(1+14%)^5))/14%= 6.62348848

Present value of Annuity = 6.62348848*10,000

= 66,234.88

The option (C) is right option.

Junaid answered 2 years ago

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