Help Save & Exit Submi Present and future value tables of $1 at 11% are presente
ID: 2556879 • Letter: H
Question
Help Save & Exit Submi Present and future value tables of $1 at 11% are presented below PV of $1 FV of $1 PVA of $1 PVA of $1 10.90090 1.11000 .90090 1.0000 2 0.81162 1.23210 1.71252 2.1100 ?0.13119 |1.36763 | 2.44371 3.3421 4 | 0.65873 | 1.51807 3.10245 | 4.7097 5 | 0.59345 | 1.68506 3.69590 6.2278 6 0.53464 1.87041 4.23054 7.9129 Splelberg Inc. signed a $290,000 noninterest-bearing note due in six years from a production company eager to do business. Comparable borrowings have carried an 11% interest rate. What is the value of this debt at its inception? Multiple Choice 155,046 Prev 2015 Next? MacBook Ai 6 9 3Explanation / Answer
The value of non-interest bearing note at the inception is the present value of amount payable at the end of period. In this case, $290,000 is payable at the end of six years. The interest rate of borrowings is 11%. The present value discounting factor for 11% in six years is 0.53464. (Refer first column last row of the table).
Value of non-interest bearing note = $290,000*0.53464 = $155,046
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