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Derek has the opportunity to buy a money machine today. The money machine will pay Derek...

Derek has the opportunity to buy a money machine today. The money machine will pay Derek $21,866.00 exactly 14.00 years from today. Assuming that Derek believes the appropriate discount rate is 9.00%, how much is he willing to pay for this money machine?

Answer format: Currency: Round to: 2 decimal places.

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Answer #1

Derek has the opportunity to buy a money machine today. The money machine will pay Derek $21,866.00 exactly 14.00 years from today. Assuming that Derek believes the appropriate discount rate is 9.00%, how much is he willing to pay for this money machine?

Future Value to be received 14 years from today = $21,866

Calculating the Present Value today:-

where, r = Interest rate = 9%

n = no of years = 14

Present Value = $6543.32

So, he willing to pay for this money machine is $6543.32

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