Question

On January 1, a company agrees to pay $20,000 in three years. If the annual interest rate is 10%, determine how much cash the company can borrow with this agreement. (PV of $1, FV of $1, PVA of $1, and FVA of $1)

Answer 1

the amount borrowed is $15,026

Step-by-step explanation:

The computation of the amount of the cash that the company could borrowed is shown below:

Amount borrowed is

= Future value × PVF factor at 10% in third year

= $20,000 × 0.7513

= $15,026

hence, the amount borrowed is $15,026

We simply applied the above formula so that the correct value could come

And, the same is to be considered