# a. What is the present value of \$240,000 to be received after 30 years with a...

a. What is the present value of \$240,000 to be received after 30 years with a 16 percent discount rate? Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

b. Would the present value of the funds in part a be enough to buy a \$2,800 concert ticket?

• No

• Yes

Solution:

a) Given,

Future value = \$240,000

Period (t) = 30

Discount rate (r) = 16%

Present value = Future value ( 1 ÷ (1+r)^t)

Present value = 240,000 ( 1 ÷ (1+0.16)^30)

Present value = 240,000 (1÷ 85.85)

Present value = 240,000 (0.01165)

Present value = \$2,795.57

As the present value of funds in part a. is less than \$2,800. So it is enough to buy a \$2,800 concert ticket.

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