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On 12-31-16, Austin entered into an agreement that required Austin to pay a supplier $1,000 every...

On 12-31-16, Austin entered into an agreement that required Austin to pay a supplier $1,000 every year on 12-31 until 2026. The agreement required Austin to make the first annual payment on 12-31-16. Assume the market rate of interest for Austin is 6%. As of 12-31-16 what was the present value of Austin’s obligation?

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Time Date Payment Present Value factor @6% Present value
0 31-Dec-16 1000                                          1.0000            1,000.00
1 31-Dec-17 1000                                          0.9434                943.40
2 31-Dec-18 1000                                          0.8900                890.00
3 31-Dec-19 1000                                          0.8396                839.60
4 31-Dec-20 1000                                          0.7921                792.10
5 31-Dec-21 1000                                          0.7473                747.30
6 31-Dec-22 1000                                          0.7050                705.00
7 31-Dec-23 1000                                          0.6651                665.10
8 31-Dec-24 1000                                          0.6274                627.40
9 31-Dec-25 1000                                          0.5919                591.90
10 31-Dec-26 1000                                          0.5584                558.40
Present value of obligation            8,360.20

ekkarill92 answered 1 year ago
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