Question

Derek has the opportunity to buy a money machine today. The money machine will pay Derek $35,847.00 exactly 16.00 years from today. Assuming that Derek believes the appropriate discount rate is 15.00%, how much is he willing to pay for this money machine

Answer 1

$3830.78

Step-by-step explanation:

We are to determine the present value of the lump sum

Present value is the sum of discounted cash flows

$35,847 / (1.15^16) = $3830.78