You have lent your friend $10500. Your friend offers you the following instead of paying the $10500 now.

End of year

Cash flow

1

3000

2

2300

3

450

4

450

What is the present value of your friend's payments?

(Using an opportunity cost of capital of 7 percent)

Would you accept your friend's offer?

Write 1 in the blank if yes

Write 2 in the blank if No