# calculation of net present value

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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• joeanne

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• Monik

• Cristina

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• Sandeep

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• Giuseppe

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