Question

The formula for calculating the present value factor for an annuity of $1 is a. Amount to Be Invested/Equal Annual Net Cash Flows b. Amount to Be Invested/Annual Average Net Income c. Annual Average Net Income/Amount to Be Invested d. Annual Net Cash Flow/Amount to Be Invested

Answer 1

Answer:

a. Amount to Be Invested/Equal Annual Net Cash Flows

Explanation:

The formula to calculate the present value factor by considering annuity is shown below:

= Invested amount ÷ Equally Annual net cash flows

As an annuity is a set of payments made at the equal periods

Simply we divide the invested amount by the equal amount of annual net cash flows so that the Present value factor of an annuity can be computed