Answer and Explanation:
The computation of the present value in the following cases are as follows
As we know that
A = P × (1 + interest)^number of years
a) P = $50,000
b) $75,000 = P × (1.12)^6
P = $37,998
c) P = $12,000 × [ 1 ÷ 1.12 + 1 ÷ 1.12^2 + 1 ÷ 1.12^3 + 1 ÷ 1.12^4 + 1 ÷ 1.12^5 + 1 ÷ 1.12^6 ]
= $12,000 × [ 1 ÷ 1.12] [1- (1 ÷ 1.12)^6] / (1 - 1 ÷ 1.12)
= $12000 × [0.893] [0.493] ÷ 0.107
= $12,000 × 4.111
= $49,332
Option A would be chosen
