On January 1, a company agrees to pay $23,000 in seven years. If
the annual interest rate is 2%, determine how much cash the company
can borrow with this agreement. (PV of $1, FV of $1, PVA of $1, and
FVA of $1) (Use appropriate factor(s) from the tables
provided. Round "Table Factor" to 4 decimal
Answer: Amount that company can borrow with the said agreement is $ 20,023.80
Present value of $23,000 can be calculated as follows:
Present value of $1 at the end of year 7 from PV table is 0.8706 at discount factor of 2%
Multiplying the discount factor with the agreed future value will give us the present value that the company can borrow.
Calculation: $ 23,000 x 0.8706 = $20,023.8
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