Following is a table for the present value of $1 at compound interest: Following is a table for the present value of an annuity of $1 at compound interest:
-Using the tables provided, if an investment is made now for $20,000 that will generate a cash inflow of $7,000 a year for the next 4 years, the present value of the investment cash inflows, assuming an earnings rate of 12%, is

Question

Following is a table for the present value of $1 at compound interest:  Following is a table for the present value of an annuity of $1 at compound interest:  ​
-Using the tables provided, if an investment is made now for $20,000 that will generate a cash inflow of $7,000 a year for the next 4 years, the present value of the investment cash inflows, assuming an earnings rate of 12%, is

Quizplus · Accepted Answer

The present value of an annuity can be calculated using the present value annuity factor, which is found using the formula $\frac{1 - (1 + r)^{-n}}{r}$, where $r$ is the interest rate and $n$ is the number of periods. For a 12% interest rate over 4 years, the present value annuity factor can be looked up or calculated. Multiplying this factor by the annual cash inflow of $7,000 gives the total present value of the investment cash inflows. Without the exact factor provided, the correct answer is based on the calculation or lookup that matches the given options, which is D, $21,259.

Following Is a Table for the Present Value of $1