Final answer:
The present value of an organization's $25,000 obligation due two years from now is less than $25,000, as it accounts for the time value of money and involves discounting the future payment to its current worth.
Step-by-step explanation:
If an organization has an obligation to pay $25,000 to a supplier two years from now, the present value of the obligation is less than $25,000. This is because present value is based on the concept that money available today is worth more than the same amount in the future due to its potential earning capacity. The process of determining present value takes into account the time value of money and involves discounting future cash flows back to the present. If we apply a positive interest rate, any future sum of money is worth less today than it will be in the future, when it is actually received. For example, if the interest rate is 25%, then a payment of $125 a year from now will have a present discounted value of $100, meaning $100 today would grow to $125 in a year at that interest rate.