Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 26

What is the present value of $1,000 to be received two years from now, if the discount rate is: (a) 10 percent, (b) 14 percent, and (c) 20 percent? Use both the appropriate table in the text (Appendix C, Table 1) and the appropriate function in Excel to answer these questions.

Step 1 of 4

The present value table makes easy the work meaningfully in computing present values of the future amount. The tables contain factors for a combination of periods and interest rates. These factors are multiplied by cash flows to find the present values. Table 1 from Appendix A is used to find the present value. The formula for calculating the present value of a future sum is as follows: