You are selling your summer cottage and have received two purchase offers. The first offer is the payment of $100,000 today and an additional $102,000 one year from today. The second offer is for $194,000 today in cash. Assume the applicable discount rate is 7.52 percent. Which offer should you accept and why?
You should accept the $194,000 today because it has the lower future value.
You should accept the first offer because it has the higher present value.
You are indifferent between the two offers.
You should accept the first offer because you will receive an extra $8,000.
You should accept the second offer because it has the higher present value.
