12. Hat Corp. has the option of receiving a $5,000 cash payment today or an $18,000 cash payment 7 years from now. The market interest rate is 12%. What should Hat Corp do? please also explain that formula(s) you used and variable inputs.

12. Hat Corp. has the option of receiving a $5,000 cash payment today or an $18,000 cash payment 7 years from now. The market interest rate is 12%. What should Hat Corp do? please also explain that formula(s) you used and variable inputs.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

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12. Hat Corp. has the option of receiving a $5,000 cash payment today or an $18,000 cash payment 7 years from now. The market interest rate is 12%. What should Hat Corp do?

please also explain that formula(s) you used and variable inputs.

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