Determining the present value of a lump-sum future cash receipt Nolan Heth turned 20 years old today. His grandfather established a trust fund that will pay Mr. Heth

$50,000 on his next birthday. Unfortunately, Mr. Heth needs money today to start his college education, and his father is willing to help. He has agreed to give Mr. Heth the present value of the future cash inflow, assuming a 10 percent rate of return.

Required

a. Use a present value table to determine the amount of cash that Mr. Heth’s father should give him.

b. Use an algebraic formula to prove that the present value of the trust fund (the amount of cash computed in Requirement

a) is equal to its $50,000 future value.