Answer:
The correct option is a. $19,073.
Explanation:
Since the company must repay the bank a single payment of $25,000, the present value can be calculated as follows:
PV = FV / present value of 1 (single sum) at 7% for 4 years ..................... (1)
Where;
PV = Present value of the loan = ?
FV = Future value of the loan = $25,000
Present value of 1 (single sum) at 7% for 4 years = 0.7629
Substituting the values into equation (1), we have:
PV = $25,000 / 0.7629
PV = $19,073
Therefore, present value of the loan (rounded) is $19,073. Therefore, the correct option is a. $19,073.
