Question

Sheridan Company will receive $880000 in a future year. If the future receipt is discounted at an interest rate of 7%, its present value is $548020. In how many years is the $880000 received

Answer 1

7 years

Step-by-step explanation:

The computation of the number of years required for $880,000 is shown below:

We have to equate the future value and the present value. Like shown below:

Future value = Present value

$880,000 = $548,020 × 1.07^n

$880,000 ÷ $548,020 = 1.07^n

1.6058 = 1.07^n

As going through the future value interest table the number of years would it take is 7 years at 7% the factor is 1.6058

Therefore the 7 years is the answer