Dodd Company is considering an investment, which will return a lump sum of $675,000 four years from now. Below is some of the time value of money information that Dodd has compiled that might help in planning compounded interest decisions. $\begin{array}{ll}
\text { Present value of } 1 \text { for } 4 \text { periods at } 10 \% & 0.68301 \
\text { Future value of } 1 \text { for } 4 \text { periods at } 10 \% & 1.46410 \
\text { Present value of an annuity of } 1 \text { for } 4 \text { periods at } 10 \% & 3.16986 \
\text { Future value of an annuity of } 1 \text { for } 4 \text { periods at } 10 \% & 4.64100
\end{array}$ To the closest dollar, what amount should Dodd Company pay for this investment to earn a 10% return?
A) $405,000
B) $270,000
C) $461,032
D) $534,914

Question

Quizplus · Accepted Answer

The present value of the lump sum is $461,032. This is calculated by multiplying the future value of $675,000 by the present value of 1 for 4 periods at 10%, which is 0.68301.

Dodd Company Is Considering an Investment, Which Will Return a Lump