Question

Your truck has a market value of $60,800. You can sell it to your brother, who agreed to buy it now and pay $77,300 three years from now, or you can sell it to your cousin who agreed to pay you $66,900 at the end of the year. To whom should you sell the truck if your cost of capital is 9 percent? (Round answers to 2 decimal places, e.g.25.25.)

Cash inflow, brother $ _________

Cash inflow, cousin $ _________

You should sell the truck to your _________

Answer 1

Cash inflow, brother = FV / (1+r)^n
                                     = $77,300 / (1+9%)^3
                                     = $59,689.78

 

Cash inflow, brother = $59,689.78

Cash inflow, cousin = FV / (1+r)^n
                                    = $66,900 / (1+9%)^1
                                   = $61,376.15

Cash inflow, cousin = $61,376.15

 

Kindly upvote my answer. Thank you. 

Kindly upvote my answer. Thank you. 

Cash inflow, brother = $59,689.78