Question

":Your local travel agent is advertising an upscale winter vacation package for travel three years from now to Antarctica. The package requires that you pay $20,000 today, $35,000 one year from today, and a final payment of $45,000 on the day you depart three years from today. What is the cost of this vacation in today's dollars if the discount rate is 9.75 percent?

Answer 1

Answer:

$85,931.40

Explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator:

Cash flow in year 0 = $20,000

Cash flow in year 1 = $35,000

Cash flow in year 2 = 0

Cash flow in year 3 = $45,000

Discount rate = $85,931.40

I hope my answer helps you