Your parents have made you two offers. The first offer includes annual gifts of $4,000, $4,500, and $5,200 at the end of each of

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Your parents have made you two offers. The first offer includes annual gifts of $4,000, $4,500, and $5,200 at the end of each of

the next three years, respectively. The other offer is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 9.7 percent. What is the minimum amount that you will accept today if you are to select the lump sum offer

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1 answer:

____ [38] · Answer 1 · 2023-01-01T04:47:53+03:00

The minimum amount that you will accept today if you are to select the lump sum offer is $11,324.66.

<h3>What is the present value of the cash flows?</h3>

The minimum amount that you will accept today if you are to select the lump sum offer is known as the present value of the cash flows. Present value is the sum of discounted cash flows.

Present value = ($4000 / 1.097) + ($4500 / 1.097²) + ($5200 / 1.097³) = $11,324.66

To learn more about present value, please check: brainly.com/question/26537392