Question

Fishermen’s Corp. is considering purchasing a boat. If the boat was purchased, it is expected to receive $20,000 at the end of the first year, $40,000 at the end of the second year, and $60,000 at the end of the third year within its business. What is the boat worth to Fishermen’s Corp today, assume an 8% discount rate?

Answer 1

Answer:

Total present value= $100,442

Explanation:

Giving the following information:

If the boat was purchased, it is expected to receive $20,000 at the end of the first year, $40,000 at the end of the second year, and $60,000 at the end of the third year within its business.

We need to use the following formula:

PV= FV/(1+i)^n

PV= 20,000/1.08= 18,518.52

PV= 40,000/1.08^2= 34,293.56

PV= 60,000/1.08^3= 47,629.93

Total present value= $100,442