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Derek has the opportunity to buy a money machine today. The money machine will pay Derek $27,509.00 exactly 6.00 years from today. Assuming that Derek believes the appropriate discount rate is 12.00%, how much is he willing to pay for this money machine?

Respuesta :

Answer:

Present value = $13936.91

Explanation:

given data

machine will pay = $27,509

time = 6 year

discount rate = 12.00%

to find out

how much is he willing to pay for money machine

solution

we get here present value of machine today that is express as

Present value = Future value ÷ [tex](1+discount\ rate)^{time}[/tex]   .................1

put here value we get

Present value = [tex]\frac{27509}{(1+.12)^6}[/tex]  

Present value = $13936.91

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