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Present value of an annuity

Determine the present value of $$250,000$ to be received at the end of each of $4$ years, using an interest rate of $10\%,$ compounded annually, as follows:

a$.$ By successive computations, using the present value of $$1$ table in Exhibit $5.$ Round to the nearest whole dollar.

First year

Second Year

Third Year

Fourth Year

Total present value

b$.$ By using the present value of an annuity of $$1$ table in Exhibit $7.$ Round to the nearest whole dollar.

c$.$ Why is the present value of the four $$250,000$ cash receipts less than the $$1,000,000$ to be received in the future?

The present value is less due to the compounding of interest $$ over the $4$ years.

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Review the time value of money concept. Recall that the time value of money concept recognizes that cash received today is worth