Fast pls i will give u like for sure solve this question correctly in 5 min pls 2. Your neighbor is buying a new electric car. He has the following options to finance thepurchase:I. Pays $10,000 today (in time 0) and $60,000 in two years (time 2)II. Make payments under an increasing schedule as follows:Time 0$7,000Time 1$9,000Time 2$11,000Time 3$13,000Time 4$15,000Time 5$17,000III. Make 72 monthly payments over 6 years of $1,100 payable at the endof each month.(a) If the annual interest rate is 7%, calculate the present value of each option.(b) At what interest rate do Option II and Option III have the same present value?

The current worth of any sum indicates its present value. As per the money's time worth concept, any…

2. Your neighbor is buying a new electric car. He has the following options to finance the purchase: I. Pays $10,000 today (in time 0) and $60,000 in two years (time 2) II. Make payments under an increasing schedule as follows: Time 0 $7,000 Time 1 $9,000 Time 2 Time 3 Time 4 Time 5 $11,000 $13,000 $15,000 $17,000 III. Make 72 monthly payments over 6 years of $1,100 payable at the end of each month. (a) If the annual interest rate is 7%, calculate the present value of each option. (b) At what interest rate do Option II and Option III have the same present value?

2. Your neighbor is buying a new electric car. He has the following options to finance the purchase: I. Pays $10,000 today (in time 0) and $60,000 in two years (time 2) II. Make payments under an increasing schedule as follows: Time 0 $7,000 Time 1 $9,000 Time 2 Time 3 Time 4 Time 5 $11,000 $13,000 $15,000 $17,000 III. Make 72 monthly payments over 6 years of $1,100 payable at the end of each month. (a) If the annual interest rate is 7%, calculate the present value of each option. (b) At what interest rate do Option II and Option III have the same present value?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 2STP

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