Suppose a supplier has an agreement with a firm to be paid $50,000 in 4 years. If the annual interest rate is 1 percent, the supplier would be indifferent between receiving _______now and waiting 4 years to receive the $50,000.
A)$48,076.92
B)$49,550.22
C)$48,049.02
D)49,557.89

Question

Quizplus · Accepted Answer

The present value (PV) of $50,000 in 4 years at an annual interest rate of 1% is calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value, r is the interest rate, and n is the number of years. Plugging in the values: PV = $50,000 / (1 + 0.01)^4 = $48,049.02.

Suppose a Supplier Has an Agreement with a Firm to Be