Answer:
1) Present Value = $10,381
2) i = 3%
3) n = 5
4) i = 4%
5) Annuity amount = $72,558
Explanation:
Given that;
No. Present Value Annuity Amount i = n =
1. ______ 2,600 8% 5
2. 507,866 135,000 ___ 4
3. 661,241 170,000 9% ___
4. 540,000 78,557 ___ 8
5. 230,000 ____ 10% 4
Assume that interest is compounded annually and that all annuity amounts are received at the end of each period, interest rate, and n number of years EV of $1, PV of $1, EVA of $1 PVA of $1, EVAD of $1 and PVAD of $.
we know that
Present value = Annuity amount × Discount factor at i% for n years
1) Present value = 2600 × Discount factor at 8% for 5 years
from the annuity table ( n = 5, i =8% :- 3.99271)
Present Value = 2600 × 3.99271 = $10,381
2) 507,866 = 135,000 × Discount factor at i% for 4 years
Discount factor at i% for 4 years = 507,866 / 135,000
Discount factor at i% for 4 years = 3.761970
Check Present value annuity table in period 4 row for 3.761970
i = 3%
3) 661,241 = 170,000 × Discount factor at 9% for n years
Discount factor at 9% for n years =661,241 / 170,000
Discount factor at 9% for n years = 3.88965
Check Present value annuity table in 9% column for 3.88965
n = 5
4) 540,000 = 78,557 × Discount factor at i% for 8 years
Discount factor at i% for 8 years = 540,000 / 78,557
Discount factor at i% for 8 years = 6.8739895
Check Present value annuity table in period 8 row for 6.8739895
i = 4%
5) 230,000 = Annuity amount × Discount factor at 10% for 4 years
from the annuity table ( n = 4, i =10% :- 3.169865)
230,000 = Annuity amount × 3.169865
Annuity amount = 230,000 / 3.169865 = $72,558
