Assume Ellina earns a 10 percent after-tax rate of return and that she owes a friend $1,200. Would she prefer to pay the friend $1,200 today or $1,750 in four years? Use

EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return

	4%	5%	6%	7%	8%	9%	10%	11%	12%
Year 1	0.962	0.952	0.943	0.935	0.926	0.917	0.909	0.901	0.893
Year 2	0.925	0.907	0.890	0.873	0.857	0.842	0.826	0.812	0.797
Year 3	0.889	0.864	0.840	0.816	0.794	0.772	0.751	0.731	0.712
Year 4	0.855	0.823	0.792	0.763	0.735	0.708	0.683	0.659	0.636
Year 5	0.822	0.784	0.747	0.713	0.681	0.650	0.621	0.593	0.567
Year 6	0.790	0.746	0.705	0.666	0.630	0.596	0.564	0.535	0.507
Year 7	0.760	0.711	0.665	0.623	0.583	0.547	0.513	0.482	0.452
Year 8	0.731	0.677	0.627	0.582	0.540	0.502	0.467	0.434	0.404
Year 9	0.703	0.645	0.592	0.544	0.500	0.460	0.424	0.391	0.361
Year 10	0.676	0.614	0.558	0.508	0.463	0.422	0.386	0.352	0.322
Year 11	0.650	0.585	0.527	0.475	0.429	0.388	0.350	0.317	0.287
Year 12	0.625	0.557	0.497	0.444	0.397	0.356	0.319	0.286	0.257
Year 13	0.601	0.530	0.469	0.415	0.368	0.326	0.290	0.258	0.229
Year 14	0.577	0.505	0.442	0.388	0.340	0.299	0.263	0.232	0.205
Year 15	0.555	0.481	0.417	0.362	0.315	0.275	0.239	0.209	0.183