Your uncle offers you a choice of $116,000 in 10 years or $55,000 today. Use App

Question

Your uncle offers you a choice of $116,000 in 10 years or $55,000 today. Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods.

If money is discounted at 9 percent, what is the present value of the $116,000? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Your uncle offers you a choice of $116,000 in 10 years or $55,000 today. Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods.

Explanation / Answer

Choice between $55000 today or

Present value of $116000 in ten years or $11600 per year for 10 years = 11600 * PVIFA(9%,10yrs)

= $11600 * 6.418 = $74448.80

So, $116000 in 10 years is preferred.

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