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Which offer should Daniel take

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1. Tammy has an heirloom that she's sure she can sell for $18,500 if she holds onto it for 16 years. She has a mutual fund that earns 12% interest, compounding monthly. Tammy was just offered $3,000 for this antique today. What is the PV of the heirloom? Should she sell it today?

A. $3,000.00. Yes, sell today.

B. $3,116.56. No, don't sell today.

C. $3,017.75. No, don't sell today.

D. $2,738.22. Yes, sell today.

2. Daniel just inherited some farmland he wants to sell. Buyer 1 is offering $60,000, but wants Daniel to keep the land for 5 years before they can pay him for the land. Buyer 2 is offering $40,000 to buy the land today. Based on a 7.5% discount rate, what is the present value of Buyer 1's offer? Which offer should Daniel take?

A. $86,137.76. Take Offer 1.

B. $41,793.52. Take Offer 1.

C. $41,613.24. Take offer 1.

D. $12,000.00. Take Offer 2.

Reference no: EM133272884

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