Your uncle offers you the choice of $115,000 in 10 years or $54,000 today. Use A

Question

Your uncle offers you the choice of $115,000 in 10 years or $54,000 today. Use Appendix B. (a) Calculate the present value of $115,000, if the money is discounted at 11 percent? (Round "PV Factor" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Present value $ (b) Which choice should you choose? $115,000 in 10 years. $54,000 today. (c) Calculate the present value, if you had to wait until 12 years to get the $115,000. (Round "PV Factor" to 3 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.) Present value $ (d) Now, which choice should you choose? $115,000 in 12 years. $54,000 today. http://lectures.mhhe.com/connect/0073530727/Images/Appendix_B.jpg

Explanation / Answer

a) PV = 115000*PV(11%,10) =115000*.352 =40480 b) Choose 54000 today c) PV = 115000*PV(12%,10) =115000*.322 =37030 d) Choose 54000 today

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