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Unformatted text preview: FV8 $1,700, n 8,
and i 0.08 into Equation 4.9 yields Equation 4.10:
(1 0.08)8 PV $1,700
1.851 $918.42 (4.10) The following time line shows this analysis.
Time line for present
value of a single
amount ($1,700 future
amount, discounted at
8%, from the end of
8 years) 0 1 2 3 End of Year
6 7 8 FV8 = $1,700 PV = $918.42 CHAPTER 4 Time Value of Money 141 Using Computational Tools to Find Present Value
present value interest factor
The multiplier used to calculate,
at a specified discount rate, the
present value of an amount to be
received in a future period. The present value calculation can be simplified by using a present value interest
factor. This factor is the multiplier used to calculate, at a specified discount rate,
the present value of an amount to be received in a future period. The present
value interest factor for the present value of $1 discounted at i percent for n periods is referred to as PVIFi,n.
Present value interest factor PVIFi,n 1
(1 i)n (4.11) Appendix Table A–2 presents present value interest factors f...
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