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Calculate the present value of this loan

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Question - On January 1, 2014, NS Power lent $100,000 to its CEO, interest-free. However, the loan is repayable in five installments, each December 31, until paid. The market rate for similar loans (with similar credit risk) is 7%.

Instructions -

a) Calculate the present value (fair value) of this loan (round to the nearest dollar).

b) Assume any interest is salary for the CEO. Prepare the journal entry to record this transaction.

Reference no: EM132032364

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