When converting future worth (F) to present worth (P), what is the formula?

The conversion from future worth (F) to present worth (P) involves calculating the value of money at a specific interest rate and time period. The correct formula employed for this calculation is based on the concept of present worth factors, which adjust the future amount to its present value.

The formula P = F * (P/F, i%, n) appropriately captures the relationship between future and present values. Here, (P/F, i%, n) is known as the present worth factor, which is derived from factors relating to interest rate (i) and the number of periods (n). This factor essentially discounts the future amount F back to its present value, reflecting the principle of the time value of money.

Using this approach, one can effectively determine how much a future sum of money is worth today, taking into account the opportunity cost of capital over time. This is crucial in investment assessments and financial planning, as it allows engineers and financial analysts to make informed decisions based on the timing of cash flows. Hence, the formula in choice B is essential to accurately convert future worth into present worth and is widely used in engineering economic analysis.