ST Trucking just signed a $3.8 million contract. The contract calls for a payment of $1.1...

ST Trucking just signed a $3.8 million contract. The contract calls for a payment of $1.1 million today, $1.3 million one year from today, and $1.4 million two years from today. What is this contract worth today at a discount rate of 8.77 percent?

$3,198,053.81

$2,108,001.32

$3,480,817.37

$3,478,523.13

$3,202,223.89

Solutions

Expert Solution

Present value=Cash flows*Present value of discounting factor(rate%,time period)

=1,100,000+1,300,000/1.0877+1,400,000/1.0877^2

which is equal to

=$3478523.13(Approx)

jeff jeffy answered 2 years ago

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