Question
1.An investment will pay $16,000 at the end of each year for eight years and a one-time payment of $160,000 at the end of the
1.An investment will pay $16,000 at the end of each year for eight years and a one-time payment of $160,000 at the end of the eighth year. (FV of $1, PV of $1, FVA of $1, and PVA of $1)(Use the appropriate factor(s) from the tables provided.)
Determine the present value of this investment using a 8% annual interest rate. (Round your answer to nearest whole dollar.)
2.You have decided to buy a used car. The dealer has offered you two options: (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)
Pay $640 per month for 30 months and an additional $10,000 at the end of 30 months. The dealer is charging an annual interest rate of 24%.
Make a one-time payment of $19,855, due when you purchase the car.
1-a. Determine how much cash the dealer would charge in option (a). (Round your final answer to nearest whole dollar.)
1-b. In present value terms, which offer is clearly a better deal?
Option a | |
Option b | |
The present values of the options are nearly the same |
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