Answer:
c. $1,682,726
Explanation:
The computation of the present value is shown below:
Year Cash flow Discount factor @4% Present value
1 $400,000 0.961538462 $384,615.38
2 $37,500 0.924556213 $34,670.86
3 $480,000 0.888996359 $426,718.25
4 $450,000 0.854804191 $384,661.89
5 $550,000 0.821927107 $452,059.91
Total present value $1,682,726.29
The discount factor is computed below:
= 1 ÷ (1 + rate)^years
