Dunston Company will receive £200,000 in a future year. If the future receipt is discounted at an interest rate of 10%, its present value is £102,632. In how many years is the £200,000 received?
A) 5 years
B) 6 years
C) 7 years
D) 8 years

Question

Quizplus · Accepted Answer

The present value of a future receipt is calculated using the formula:PV = FV / (1 + r)^nwhere:PV is the present valueFV is the future valuer is the interest raten is the number of yearsIn this case, we have:PV = £102,632FV = £200,000r = 10%Substituting these values into the formula, we get:£102,632 = £200,000 / (1 + 0.1)^nSolving for n, we get:n = 7 yearsTherefore, the £200,000 is received in 7 years.

Dunston Company Will Receive £200,000 in a Future Year