If the interest rate is 6%, which expression will determine the appropriate price to pay for a business that you expect to earn $5,000 in each of the next ten years and be sold for $25,000 in the eleventh year. A)PV = $5,000[FVFA_6,10] + $25,000[FVF_6,11] B)PV = $5,000[PVFA_6,10] + $25,000[FVF_6,11] C)PV = $5,000[PVFA_6,10] + $25,000[PVF_6,11] D)None of the above

Question

Quizplus · Accepted Answer

The correct expression uses the Present Value of an Annuity formula (PVFA) for the $5,000 annual earnings over 10 years and the Present Value formula (PVF) for the $25,000 to be received in the 11th year, both discounted at a 6% interest rate.

If the Interest Rate Is 6%, Which Expression Will Determine