Barkley 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?
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Question

Quizplus · Accepted Answer

Using the formula for present value, PV=FV/(1+r)^n, we can solve for n:

63,017 = 100,000/(1+0.08)^n
0.68017 = 1/(1+0.08)^n
n = 6.99

Since we cannot have a fraction of a year, we round up to the nearest whole number and get 7 years. Therefore, the best choice is C.

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