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Chrome - Module 5 Practice Capital Decisions (Question 3) Lyryx Learning Inc
Module 5 Practice: Capital Decisions
(Question 3)
Name: Miguel Ardila
Date: 
2024-04-14 17:23
Question 3 [7 points]
Stefan has received three offers to purchase his used combine. Farmer A has offered him 
$162,000 today and 
$98,000 three years from now. Farmer B has offered him 
$47,000 today and 
$36,000 every six months for three years. Farmer 
C has offered him four annual payments of 
$68,300 starting today. The prevailing interest rates are 
8.75% compounded annually. For full marks your answer(s) should be rounded to the nearest dollar.
a) Calculate the NPV of the offer from Farmer A.

NPV=$255,975.00
b) Calculate the NPV of the offer from Farmer B.

" NPV "=$0.00
c) Calculate the NPV of the offer from Farmer C.

NPV=$0.00
d) Which offer should Stefan accept?
Stefan should accept the offer from (select one).
Marking:
a) Your answer was: 
$255,975
The correct answer was: 
$238,197
The periodic rate is computed by dividing the nominal rate by the number of compounding periods per year, so a 7 co:

Chrome - Module 55 Practice Capital Decisions (Question 33) Lyryx Learning Inc\newlineModule 55 Practice: Capital Decisions\newline(Question 33)\newlineName: Miguel Ardila\newlineDate: 20240414 2024-04-14 1717:2323\newlineQuestion 33 [77 points]\newlineStefan has received three offers to purchase his used combine. Farmer A has offered him $162,000 \$ 162,000 today and $98,000 \$ 98,000 three years from now. Farmer B has offered him $47,000 \$ 47,000 today and $36,000 \$ 36,000 every six months for three years. Farmer C C has offered him four annual payments of $68,300 \$ 68,300 starting today. The prevailing interest rates are 8.75% 8.75 \% compounded annually. For full marks your answer(s) should be rounded to the nearest dollar.\newlinea) Calculate the NPV of the offer from Farmer A.\newlineNPV=$255,975.00 N P V=\$ 255,975.00 \newlineb) Calculate the NPV of the offer from Farmer B.\newline NPV =$0.00 \text { NPV }=\$ 0.00 \newlinec) Calculate the NPV of the offer from Farmer C.\newlineNPV=$0.00 \mathrm{NPV}=\$ 0.00 \newlined) Which offer should Stefan accept?\newlineStefan should accept the offer from (select one).\newlineMarking:\newlinea) Your answer was: $255,975 \$ 255,975 \newlineThe correct answer was: $238,197 \$ 238,197 \newlineThe periodic rate is computed by dividing the nominal rate by the number of compounding periods per year, so a 77 co:

Full solution

Q. Chrome - Module 55 Practice Capital Decisions (Question 33) Lyryx Learning Inc\newlineModule 55 Practice: Capital Decisions\newline(Question 33)\newlineName: Miguel Ardila\newlineDate: 20240414 2024-04-14 1717:2323\newlineQuestion 33 [77 points]\newlineStefan has received three offers to purchase his used combine. Farmer A has offered him $162,000 \$ 162,000 today and $98,000 \$ 98,000 three years from now. Farmer B has offered him $47,000 \$ 47,000 today and $36,000 \$ 36,000 every six months for three years. Farmer C C has offered him four annual payments of $68,300 \$ 68,300 starting today. The prevailing interest rates are 8.75% 8.75 \% compounded annually. For full marks your answer(s) should be rounded to the nearest dollar.\newlinea) Calculate the NPV of the offer from Farmer A.\newlineNPV=$255,975.00 N P V=\$ 255,975.00 \newlineb) Calculate the NPV of the offer from Farmer B.\newline NPV =$0.00 \text { NPV }=\$ 0.00 \newlinec) Calculate the NPV of the offer from Farmer C.\newlineNPV=$0.00 \mathrm{NPV}=\$ 0.00 \newlined) Which offer should Stefan accept?\newlineStefan should accept the offer from (select one).\newlineMarking:\newlinea) Your answer was: $255,975 \$ 255,975 \newlineThe correct answer was: $238,197 \$ 238,197 \newlineThe periodic rate is computed by dividing the nominal rate by the number of compounding periods per year, so a 77 co:
  1. Calculate Present Value: Now, let's do the calculation for the present value of the $98,000\$98,000.PV=$98,000(1+0.0875)3PV = \frac{\$98,000}{(1 + 0.0875)^3}PV=$98,000(1.0875)3PV = \frac{\$98,000}{(1.0875)^3}PV=$98,0001.2877PV = \frac{\$98,000}{1.2877}PV=$76,123.45PV = \$76,123.45
  2. Calculate Total NPV: Next, we add the present value of the $98,000\$98,000 received in 33 years to the $162,000\$162,000 received today to get the total NPV for Farmer A.NPV=$162,000+$76,123.45\text{NPV} = \$162,000 + \$76,123.45NPV=$238,123.45\text{NPV} = \$238,123.45

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