Future Value

Mr. B will receive $100,000 at the end of the 5th year. If opportunity cost is 9%. What will be the present value of the amount today?

Solutions

Expert Solution

Here,

Future Value = $100,000

Number of year = 5

Opportunity cost = 9%

The terms used in formulas

FV - Future Value

PV - Present Value

r - opportunity Cost

n - number of years

$ \begin{align}PV &= FV(1+r)^{-n}\\ &= \$100,000(1+0.09)^{-5}\\ &= \$64,993.14 \end{align} $

Hence, the present value of the investment is $64,993.14

The present value is $64,993.14

Vinay answered 2 years ago

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