calculation of net present value
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Question
You have some property for sale and have received two offers. The first offer is for $189,000 today in cash. The second offer is the payment of $100,000 today and an additional $100,000 two years from today. If the applicable discount rate is 8.75%, which offer should you accept and why?
a. You should accept the $189,000 today because it has the higher net present value.
b. You should accept the $189,000 today because it has the lower future value.
c. You should accept the second offer because you will receive $200,000 total.
d. You should accept the second offer because you will receive an extra $11,000.
e. You should accept the second offer because it has a present value of $194,555.42.
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