question archive Your firm rents office space for P250,000 per year, due at the BEGINNING of each year
Your firm rents office space for P250,000 per year, due at the BEGINNING of each year
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Your firm rents office space for P250,000 per year, due at the BEGINNING of each year. If your firm's hurdle rate is 10%, what is the present value of five years' worth of rent?
a. P1,042,466.36
b. P402,627.50
c. P170,753.36
d. P155,230.33
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Answer : a. P1,042,466.36
Step-by-step explanation
| Period | Period Factor | Cash Inflow | Present Value of Cash Inflows |
| (Cash Inflow / (1 +10%)Period Factor | |||
| 1st Year | 0 | 250,000.00 | 250,000.00 |
| 2nd Year | 1 | 250,000.00 | 227,272.73 |
| 3rd Year | 2 | 250,000.00 | 206,611.57 |
| 4th Year | 3 | 250,000.00 | 187,828.70 |
| 5th year | 4 | 250,000.00 | 170,753.36 |
| Total | 1,042,466.36 |
