Asked by Morgan Freeman on Jul 15, 2024
Verified
Donnelly Excavating has received two offers on a used backhoe that Donnelly is advertising for sale. Offer 1 is for $10,000 down, $15,000 in six months, and $15,000 in 18 months. Offer 2 is for $8,000 down plus two $17,500 payments one and two years from now. What is the economic value of each offer today if money is worth 4.25% compounded semi-annually? Which offer should be accepted?
Economic Value
Refers to the worth of a good or service, as determined by the market or its utility to an individual or business.
- Leverage the time value of money concept to judge payment sequences and the impacts on investment returns.
- Analyze the economic correspondence among various payment schedules within diverse interest rate environments.
Verified Answer
AR
alyssa reignJul 19, 2024
Final Answer :
Offer 1 = $38,165.99 and Offer 2 = $38,337.91 Accept offer 1.
Learning Objectives
- Leverage the time value of money concept to judge payment sequences and the impacts on investment returns.
- Analyze the economic correspondence among various payment schedules within diverse interest rate environments.