What is the present value of a program that will be worth $3,567,000 if it lasts for six years and the rate of return is five percent?
What is the present value of a program that will be worth $3,567,000 if it lasts for six years and the rate of return is five percent?
To find the present value of a future amount of $3,567,000 when the rate of return is 5% over six years, the Present Value (PV) formula is used. The formula is PV = FV / (1 + r)^n, where FV is the future value, r is the rate of return, and n is the number of years. Plugging in the values: PV = $3,567,000 / (1 + 0.05)^6. Calculating this gives PV = $3,567,000 / (1.05)^6. Using a calculator, (1.05)^6 equals approximately 1.3401. Therefore, PV = $3,567,000 / 1.3401, which equals approximately $2,661,750. Hence, the correct present value is $2,661,750.
One oversight in an earlier one, $3,567,000 (1/(1+0.05)^6)= 2,661,750 . 6 is for 6 years and 0.05 is for 5%.
$3,567,000 (1/(1+005)^6)= 2,661,750
D is right answer
Dont Expect Such kind of Questions in PgMP Exam
PLease can you explain how the answer is derived?
Formula: PV = FV / (1+i)^n PV is Present Value FV is Future Value i is Interest n is number of years You will need a Scientific calculator using the big X to exponent Y button. Here is the order of operations: 1. 1 + the interest rate is 1.05 2. 1.05 to the 15th power 3. divide $3,567,00 by that number But with the scientific calculator, do the formula: $3,567,000 / (1.05)^16