Answer:
$37,400
Step-by-step explanation:
The computation of the inflation-adjusted present value of the contract is shown below:
Given that
At the zero year = $5,000
From 1st to 5th year = $10,000
Discount rate = 12%
Inflation Rate = 4%
Now
Adjusted discount rate is
= 12% + 4% + (.12 × .04)
= 16.48%
And,
Present Worth is
= $5,000 + $10,000 (P/A, 16.48%, 5)
= $5000 + $10,000 (3.2358)
= $37,358
= $37,400