You have a sub-contracting job with a local manufacturing firm. Your agreement calls for annual payments of $50,000 for the next five years. At a discount rate of 12%, what is this job worth to you today?
A) $180,238.81
B) $201,867.47
C) $210,618.19
D) $223,162.50
E) $224,267.10

Question

Quizplus · Accepted Answer

The job's present value is calculated using the formula for the present value of an annuity: PV = P * [(1 - (1 + r)^-n) / r], where P is the annual payment ($50,000), r is the discount rate (12% or 0.12), and n is the number of periods (5 years). Plugging in these values gives a present value of approximately $180,238.81.

You Have a Sub-Contracting Job with a Local Manufacturing Firm