A company wants to have $40,000 at the end of a five-year period through investment of a single sum now. How much needs to be invested in order to have the desired sum in five years, if the money can be invested at 10% (Ignore income taxes.)?Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. (Round your intermediate calculations to 3 decimal places.)Garrison 16e Rechecks 2017-12-15
A) $10,551
B) $8,000
C) $24,840
D) $12,882

Question

Quizplus · Accepted Answer

Using Exhibit 14B-1, the discount factor for 5 years at 10% is 0.62092. To find the amount needed to be invested today, we can set up the following equation:

$40,000 = PV x 0.62092

PV (present value) = $40,000/0.62092 = $64,376.04

Therefore, the company needs to invest $24,840 (rounded to the nearest dollar) today to have $40,000 in five years at a 10% rate of return.

A Company Wants to Have $40,000 at the End of a Five-Year