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Calculate the present value of $100,000 in the given cases

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Using the present value function in MS Excel, verify that the present value of $100,000 to be received in five years at an interest rate of 16%, compounded annually, is $47,610. Calculate the present value of $100,000 for each of the following items (parts a-f) using these facts:

a. Interest is compounded semiannually
b. Interest is compounded quarterly
c. A discount rate of 12% is used
d. A discount rate of 20% is used
e. The cash will be received in three years
f. The cash will be received in seven years

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Solution Summary

This solution describes the steps to calculate the present values in the given cases, using Excel calculations.

Solution Preview

Please refer attached file for better clarity of functions in MS Excel.

Future Value=FV=100,000
Number of periods=NPER= 5
Interest Rate=RATE=16%
Periodic Payment=PMT=0
Type of payment=0
PV can be found by using PV function in MS Excel.
PV= $47,611 =-PV(D8,D7,D9,D6,D10)
Ignoring rounding off errors , we received the same value as given.

a. Interest is compounded semiannually
Future Value=FV=100,000
Number of periods=NPER=5*2=10
Interest ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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