Determining the present value of a lump-sum future cash receipt Stan Sweeney turned 20 years old today. His grandfather had established a trust fund that will pay him $80,000 on his next birthday. However, Stan needs money today to start his college education, and his father is willing to help. Mr. Sweeney has agreed to give Stan the present value of the $80,000 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.