Carol Thomas will pay out $6,000 at the end of year two and $8,000 at the end of year three. Then Carol will receive $10,000 at the end of year four. With an interest rate of 10%, what is the net value of the payments versus receipts in today's dollars?
A) ($7,326)
B) ($10,242)
C) ($17,794)
D) ($4,134)

Question

Quizplus · Accepted Answer

PV = FV × PV_IF (App. B: 10%, 2 periods) = $6,000 × 0.826 = $4,956 PV = FV × PV_IF (App. B: 10%, 3 periods) = $8,000 × 0.751 = $6,008 PV = FV × PV_IF (App. B: 10%, 4 periods) = $10,000 × 0.683 = $6,830 Net Value of Payments = ($4,956) + ($6,008) + $6,830 = ($4,134)

Carol Thomas Will Pay Out $6,000 at the End of Year