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Q8BP-b

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Foundations Of Financial Management
Found in: Page 282
Foundations Of Financial Management

Foundations Of Financial Management

Book edition 16th
Author(s) Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Pages 768 pages
ISBN 9781259277160

Short Answer

Your father offers you a choice of $105,000 in 12 years or $47,000 today. b. If money is still discounted at 8 percent, but your choice is between $105,000 in 9 years or $47,000 today, which should you choose?

The choice of $105,000 in 9 years should be preferred over$47,000 today

See the step by step solution

Step by Step Solution

Step 1: Identification of the required information

Future value (FV) = $105,000

Interest Rate (i) = 8%

Period (n) = 9 year

Step 2: Present value (PV)

Step 3: Final decision

The present value of $105,000 in 9 years is $52,526.14 which is more than $47,000 today. Thus, the option of $105,000 in 9 years should be chosen.

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