Question

You are planning to sell some furniture and you have two offers. Your friend will give you $100 today, $200 in one year and $300 in two years. A consignment shop will give you $500 today. Your required return is 7%. What is the value of your friend's offer

Answer 1

$548.95

Step-by-step explanation:

To find the value of my friend's offer, I would find the present value of the offer

The present value is the sum of discounted cash flows

Cash flow at year zero = $100

Cash flow at year one = $200

Cash flow at year two = $300

Discount rate = 7%

Present value = $548.95

The value of my friends offer is $548.95

I hope my answer helps you