Orange Computers, Inc., is planning to spend $200,000 on the promotion of its new portable music player next year. The current market interest rate is 5 percent. What is the present value of this
Promotional budget?

Question

Quizplus · Accepted Answer

The present value (PV) of the promotional budget can be calculated using the formula PV = FV / (1 + r)^n, where FV is the future value ($200,000), r is the interest rate (5% or 0.05), and n is the number of periods (1 year). Plugging in the values, we get PV = $200,000 / (1 + 0.05)^1 = $200,000 / 1.05 = $190,476.