Ashley, from your workbook, has discovered another wine, wine D.Wine drinkers are willing to pay 40 dollars to drink it right now.The amount that wine drinkers are willing to pay will rise by 20 dollars each year that the wine ages.The interest rate is 10%.How much would Ashley be willing to pay for the wine if he buys it as an investment? (Pick the closest answer.)
A)93 dollars
B)40 dollars
C)200 dollars
D)440 dollars
E)71 dollars

Question

Quizplus · Accepted Answer

The future value of the wine increases by $20 each year. The present value of these future cash flows, discounted at 10%, is closest to $93.

Ashley, from Your Workbook, Has Discovered Another Wine, Wine D