Question

The project steering committee is considering which project they should invest capital in. Mary's project promises to be worth $175,000 in 4 years. The steering committee is interest in Mary's project, but they would like to know the present value of the return if the interest rate is 6%. What is the value of Mary's project?

Answer 1

Answer:

Explanation:

Use Present value formula since $175,000 expected in 4 years is a one-time cashflow.

PV = FV/ (1+r)^t

FV ; future value= 175,000

r= interest rate = 6%

n = 4

PV = 175,000/ (1+0.06)^4

PV = 175,000 / 1.06^4

=175,000 / 1.262477

= 138,616.39

Therefore, the value of Mary's project is $138,616.39