Coming Up Roses has grown into a very successful business and you have just received an offer from someone to purchase the business from you for $1.2 million. The potential buyer has offered you $400,000 at the time of sale, $600,000 at the end of the growing season, in 6 months, and the balance, $200,000 in 1.5 years from now. 1. What is the present value of this offer if you could invest at 6% compounding monthly? 2. If another buyer offered you $1,175,000 cash right now, which is the better deal? Why? 3. You have decided to accept the first offer, but will charge the buyer interest on the second and third payments. You will charge 6% interest, compounded monthly. Calculate the second and third payment.
Coming Up Roses has grown into a very successful business and you have just received an offer from someone to purchase the business from you for $1.2 million. The potential buyer has offered you $400,000 at the time of sale, $600,000 at the end of the growing season, in 6 months, and the balance, $200,000 in 1.5 years from now. 1. What is the present value of this offer if you could invest at 6% compounding monthly? 2. If another buyer offered you $1,175,000 cash right now, which is the better deal? Why? 3. You have decided to accept the first offer, but will charge the buyer interest on the second and third payments. You will charge 6% interest, compounded monthly. Calculate the second and third payment.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Cash in Hand, Now or Later
Coming Up Roses has grown into a very successful business and you have just
received an offer from someone to purchase the business from you for $1.2
million. The potential buyer has offered you $400,000 at the time of sale,
$600,000 at the end of the growing season, in 6 months, and the balance, $200,000
in 1.5
from now.
years
1. What is the present value of this offer if you could invest at 6%
compounding monthly?
2. If another buyer offered you $1,175,000 cash right now, which is the better
deal? Why?
3. You have decided to accept the first offer, but will charge the buyer interest
on the second and third payments. You will charge 6% interest,
compounded monthly. Calculate the second and third payment.
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