Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 22

Review problem-time value of money applications An investor has asked for your help with the following time value of money applications. Use the appropriate factors from Table 6-4 or Table 6-5 to answer the following questions.
Required:
a. What is the present value of $65,000 to be received in five years using a discount rate of 12%?
b. How much should be invested today at a return on investment of 12% compounded annually to have $65,000 in five years?
c. If the return on investment was greater than 12% compounded annually, would the amount to be invested today to have $65,000 in five years be more or less than the answer to part b ? Explain your answer.
Reference Table 6-4:

Reference Table 6-5: