Question

On Jan 1st, 2020, Lepochat provided services in exchange for a 2-year $50,000 8% note receivable. What is the present value of the note receivable?

a) $46,296
b) $47,825
c) $48,799
d) $49,306

Answer 1

The present value of the note receivable is $46,296.

Step-by-step explanation:

The present value of the note receivable can be calculated using the present value formula. In this case, the formula is:

Present Value = Payment / (1 + Interest Rate)n

Where:

• Payment is the amount of money received in each period
• Interest Rate is the discount rate
• n is the number of periods

In this question, the payment is $50,000, the interest rate is 8%, and the period is 2 years. Plugging these values into the formula gives:

Present Value = $50,000 / (1 + 8%)2 = $46,296

Therefore, the present value of the note receivable is $46,296.