Tracy purchased a 15-year franchise for a computer outlet store that is expected to generate income at the rate of
Dollars/year. If the prevailing interest rate is 10% /year compounded continuously, find the present value of the franchise. (Hint: Use the formula of the present value .) Please round the answer to the nearest cent.
A) $589,808.22
B) $884,712.33
C) $530,827.40
D) $471,846.58
E) $674,066.54

Question

Tracy purchased a 15-year franchise for a computer outlet store that is expected to generate income at the rate of ​  ​
Dollars/year. If the prevailing interest rate is 10% /year compounded continuously, find the present value of the franchise. (Hint: Use the formula of the present value  .) Please round the answer to the nearest cent.
A) $589,808.22 
B) $884,712.33 
C) $530,827.40 
D) $471,846.58 
E) $674,066.54

Quizplus · Accepted Answer

Using the formula for present value:
PV = CF/r
where PV is the present value, CF is the cash flow, and r is the interest rate.
Substituting the given values:
PV = 11eb651f_cb04_e8ad_b0a1_1d14c950095f_TB8255_11 / 0.1
PV = $589,808.22 (rounded to the nearest cent)

Tracy Purchased a 15-Year Franchise for a Computer Outlet Store