Your uncle offers you a choice of $108,000 in 10 years or $37,000 today. Use App

Question

Your uncle offers you a choice of $108,000 in 10 years or $37,000 today. Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods.

  
a-1. If money is discounted at 11 percent, what is the present value of the $108,000? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Present value =
  
a-2. Which offer should you choose?

$108,000 after 10 years $37,000 today Appendix B Present value of $1,PVF PV=FV Percent Period 4 Appendlx B (concluded) Percent Period 50% 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.640 0.592 0.549 0.510 0.444 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0512 0.455 0.406 0.364 0.296 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.262 0.207 0.165 0.133 0.088 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.210 0.159 0.122 0.095 0.059 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.086 0.056 0.037 0.025 0.012 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.035 0.020 0.011 0.006 0.002 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.023 0.012 0.006 0.003 0.001 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.014 0.007 0.003 0.002 0 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.012 0.005 0.002 0.001 0 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.004 0.001 0.001 0 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.001 0

Explanation / Answer

a-1. PV = CF1 / (1+R)N

FV = 108000 , Rate = 11%, N= 10

PV = 38035.92

a-2. PV of 38035 vs 37000 today we will select $108,000 after 10 years

Since the PV is greater

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.