Pams opportunity cost is 8 substituting fv8 1700 n 8

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Unformatted text preview: FV8 $1,700, n 8, and i 0.08 into Equation 4.9 yields Equation 4.10: $1,700 (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 4 5 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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