Swanson Company will receive $100,000 in a future year.If the future receipt is discounted at an interest rate of 8%, its present value is $63,017.In how many years is the $100,000 received?
A)5 years
B)6 years
C)7 years
D)8 years

Question

Quizplus · Accepted Answer

Using the formula for present value, PV = FV / (1 + i)^n, where PV is the present value, FV is the future value, i is the interest rate, and n is the number of years, we can solve for n:

63,017 = 100,000 / (1 + 0.08)^n

Simplifying:

(1.08)^n = 1.587

Taking the natural logarithm of both sides:

n*ln(1.08) = ln(1.587)

n = ln(1.587) / ln(1.08)

n ≈ 6

Therefore, the $100,000 will be received in 6 years.

Swanson Company Will Receive $100,000 in a Future Year