What is the present value of a program that will be worth $3,567,000 if it lasts for six years and the rate of return is five percent?

The correct answer is D. $2,661,750. Present Value (PV) is calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value, r is the discount/interest rate, and n is the number of periods. Plugging in the values: PV = $3,567,000 / (1.05)^6. (1.05)^6 = 1.3401. PV = $3,567,000 / 1.3401 ≈ $2,661,750…

Program Benefits Management

Question

Options

A$1,550,850
B$3,532,000
C$2,502,750
D$2,661,750

How the community answered

(59 responses)

A
3% (2)
B
14% (8)
C
7% (4)
D
76% (45)

Explanation

Present Value (PV) is calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value, r is the discount/interest rate, and n is the number of periods. Plugging in the values: PV = $3,567,000 / (1.05)^6. (1.05)^6 = 1.3401. PV = $3,567,000 / 1.3401 ≈ $2,661,750. Present value discounts future money back to today's dollars to reflect the time value of money-a dollar today is worth more than a dollar in the future. Answer D ($2,661,750) is correct. The other options result from incorrect application of the formula or wrong exponent values.

Topics

#Present Value Calculation#Financial Analysis#Program Benefits Realization#Investment Appraisal

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