Orange Computers, Inc., is planning to spend $200,000 on the promotion of its new portable music player next year.The current market interest rate is 5 percent.What is the present value of this promotional budget?
A)$175,146
B)$185,123
C)$190,476
D)$200,000

Question

Quizplus · Accepted Answer

The present value (PV) is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value ($200,000), r is the interest rate (0.05), and n is the number of periods (1 year). Thus, PV = $200,000 / (1 + 0.05) = $190,476.