Question

Sunland Company is considering an investment that will return a lump sum of \$580,000 5 years...

Sunland Company is considering an investment that will return a lump sum of \$580,000 5 years from now. What amount should Sunland Company pay for this investment in order to earn a 6% return? (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answer to 2 decimal places, e.g. 5,275.25.)

Click here to view the factor table PRESENT VALUE OF AN ANNUITY OF 1.

 Amount to pay for this investment \$enter a dollar amount to pay for this investment rounded to 2 decimal places \$

By P.V factor-

Amount will be Received = \$580,000
Period = 5 years
Return = 6%

Amount to be Invested = \$5,80,000 * PV of \$1 (6%, 5)
Amount to be Invested= \$580,000 * 0.74726
Amount to be Invested = \$4,33,410.80

Sunland Company should invest today= \$4,33,410.80

By F.V factor-

Future value of \$1 @6% for 5 years is 1.33823

So investment required today = \$5,80,000/1.33823

Amount to be Invested today= \$4,33,408.31

Note- Difference in answer by both method might be slightly change due to last decimal places of P.V./F.V. value factors.

Thanks & all the best.......

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