You have just received a judgment in a product liability suit that will pay you $40,000...

You have just received a judgment in a product liability suit that will pay you $40,000 at the end of each of the next five years.

Question: If you can earn interest at a rate of 8% compounded annually, what is the present value of this judgment?

Time Value of Money Tables link (will open in a new window)

Select one:

a. $ 234,664

b. $ 18,528

c. $ 159,708

d. $ 200,000

e. $ 58,773

Expert Solution

CACLULATION OF THE PRESENT VALUE OF THE JUSDGEMENT

Years	Cash Inflow (Outflow)	PVF of $ 1 @ 8%	Present Value (A XB)
1	$ 40,000	0.92593	$ 37,037.04
2	$ 40,000	0.85734	$ 34,293.55
3	$ 40,000	0.79383	$ 31,753.29
4	$ 40,000	0.73503	$ 29,401.19
5	$ 40,000	0.68058	$ 27,223.33
			$ 1,59,708.40

	Total Net Present Value	$ 1,59,708


Answer = Option C = $ 159,708

ekkarill92 answered 1 year ago

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