Among its other assets, your company owns a note receivable from a customer. The terms of the note entitle your company to receive a $50,000 cash payment at the end of each of the next three years. Assuming a market rate of interest of 8%, what is the approximate economic value of your company's note receivable?
A) $150,000
B) $62,986
C) $138,889
D) $128,855

Question

Quizplus · Accepted Answer

The economic value of the note receivable is calculated using the present value of an annuity formula, which accounts for the time value of money. Given the annual cash payment of $50,000 for three years and a discount rate of 8%, the present value is approximately $128,855.

Among Its Other Assets, Your Company Owns a Note Receivable