Barber Company will receive €1,000,000 in 7 years. If the appropriate interest rate is 10%, the present value of the €1,000,000 receipt is
A) €510,000.
B) €513,160.
C) €1,510,000.
D) €1,948,720.

Question

Quizplus · Accepted Answer

The present value of the €1,000,000 receipt can be calculated using the following formula: PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of years.

Plugging in the numbers, we get:
PV = €1,000,000 / (1 + 0.10)^7
PV = €1,000,000 / 1.948717
PV = €513,160.49

Therefore, the present value of the €1,000,000 receipt is €513,160. So, the best choice is B.

Barber Company Will Receive €1,000,000 in 7 Years