Question

anna owes home antiques Whose value is 160000 today assuming normal growth. however anna believes the value will grow at 16% per year for the next three years she wants to take this rapis growth ibto consideration when valuing the buisness for potential sale find the future value of the buisness in three years then use that future value to find the present value at a rate 8% compounded annually

Answer 1

The formula is
A=p (1+r)^t
A future value?
P present value 160000
R interest rate 0.16
T time 3years
A=160,000×(1+0.16)^(3)
A=249,743.36

Use that future value to find the present value at a rate 8% compounded annually
To find p (present value) solve the formula for p
P=A÷ (1+r)^t
Where r is 0.08
P=249,743.36÷(1+0.08)^(3)
p=198,254.33