Question

In: Finance

Present Value & Future Value calculation

Calculate the required values and select the correct option.

Solutions

Expert Solution

In this case, we use the formula for Present Value of Annuity
 
PV(ordinary annuity) = C * [ { 1 - (1+i)-n} / i ]
 
Here,
 
C = $ 1,800,000
i = 7% or 0.07
n = 25
 
Putting the values in the formula, we derive PV = $ 20,976,449.72 or $ 20,976,450

Present Value: $20,976,450.

 

Hence, Option C is selected.

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