✏️Computation of Present Value🟢

Responses

1. 

   Hager Al Marm 7 August 2026

   Why do we calculate an annuity here?

   1. 

      Maroun, CPA 10 August 2026

      Hello Hager,

      In time value of money, an annuity simply means a series of equal payments or receipts made at regular intervals.

      In Parts A and B, the company receives or pays $42,000 at the end of each period for several periods. Because the amounts are equal and occur regularly at the end of each period, they form an ordinary annuity.

      If there were only one $42,000 payment, we would use the present value of $1 factor instead.

      Part C is a deferred annuity because the four equal payments occur at the ends of Periods 7 through 10. We subtract the 6-period annuity factor from the 10-period annuity factor to isolate only those four payments.

      Hope this helps!