Lora Corporation will receive $10,000 a year at the end of each of the next five years.Using a discount rate of 14%,the present value of the receipts can be stated as ________.

Question

Quizplus · Accepted Answer

The present value of an ordinary annuity can be calculated using the ordinary annuity PV factor, which takes into account a stream of equal payments received at the end of each period. In this case, Lora Corporation will receive $10,000 at the end of each of the next 5 years, making it an ordinary annuity. Therefore, the correct formula to use is PV = $10,000 (Ordinary Annuity PV factor, i = 14%, n = 5).

Lora Corporation Will Receive $10,000 a Year at the End