Assuming an after-tax rate of return of 10%, John should prefer to pay $85 today instead of $100 in one year.

Question

Quizplus · Accepted Answer

If John pays $85 today, he avoids having to wait one year for his investment to grow. Assuming an after-tax rate of return of 10%, the $85 will grow to $93.50 in one year ((1+0.10)*(85)-0.10*(85)). This is greater than the $100 he would receive in one year, so paying $85 today is the better option.

Assuming an After-Tax Rate of Return of 10%, John Should