A salt mine you inherited will pay you 25,000 per year for 25 years, with the first payment being made todayIf you think retum t
he mine is 7.5%, how much should you ask for if you decide to sell?
a. $284,595b. $299,574c. $314,553d. $330,281e. $346,795
a. $284,595b. $299,574c. $314,553d. $330,281e. $346,795
1 answer:
Answer:
b. $299,574
Explanation:
For calculating the ask price, we first need to compute the present value which is attached in the spreadsheet.
In this question, we use the present value formula which is shown in the spreadsheet.
The NPER represents the time period.
Given that,
Future value = $0
Rate of interest = 7.5%
NPER = 25 years - 1 years = 24 years
PMT = $25,000
The formula is shown below:
= -PV(Rate;NPER;PMT;FV;type)
So, after solving this, the present value is $278,673.65
Now the ask price is
= $274,574.17 + $25,000
= $299,574.17
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