Acc202-Stan Sweeney turned 20 years old today. His grandfather established a trust fund that will…

Determining the present value of a lump- sum future cash receipt

Stan Sweeney turned 20 years old today. His grandfather established a trust fund that will pay Mr. Sweeney $ 80,000 on his next birthday. However, Stan needs money today to start his college education. His father is willing to help and has agreed to give Stan 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 Stan Sweeney'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 $ 80,000 future value.