What is the actual present value

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You are the owner of an apartment building that is being offered for sale for $1,500,000. You receive an offer from a prospective buyer who wants to pay you $500,000 now, $500,000 in 6 months, and $500,000 in 1 year.

-What is the actual present value of this offer considering you can earn 12% interest compounded monthly in your money?

-If another buyer offers to pay you $1,425,000 cash now, which is better deal?

-Because you understand the "time value of money" concept, you have negotiated a deal with the original buyer from part a whereby you will accept the three-payment offer but will charge 12% interest compounded monthly on the two delayed payments. Calculate the total purchase price under this new apartment.

-Now calculate the present value of the new deal to verify that you will receive the original asking price of $1,500,000 for your apartment building.

Reference no: EM133036215

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