Question

Question 9 9. At an annual interest rate of 7%, the present value of $10000 received in seven years is closest to: A) $3565 B) 56227 C) $7015 D) $7035 OA oc OD • Previous Ich gjo s yllullo

Answer 1

9)	Present Value = Future value/ ((1+r)^t)
	where r is the interest rate that is 7% and t is the time period in years that is 7.
	Future value	10000
	Present Value	10000/((1.07)^7)
	Present Value	6227.497
	The present value is closest to
	B) $6227.
12)	Present Value = Future value/ ((1+r)^t)
	where r is the interest rate that is 15% and t is the time period in years.
	Net present value (NPV) = initial investment + sum of present values of future cash flows.
	Year	0	1	2	3
	cash flow	-1500000	350000	450000	630000
	present value		304347.8	340264.7	414235.2
	NPV	-441152
	The NPV is -$441152.
	The company should not invest in this opportunity since the NPV is negative.
	D.