Your company just sold a product with the following payment plan: $40,000 today,$35,000 next year,and $30,000 the following year.If your firm places the payments into an account earning 6% per year,how much money will be in the account after collecting the last payment?
A)$118,767
B)$112,044
C)$94,074
D)$85,000

Question

Quizplus · Accepted Answer

To find out how much money will be in the account after collecting the last payment, we first need to find the future value of each payment and then add them up.

The future value of $40,000 today, after two years (the time it takes to collect all payments), is: 
$40,000 x (1 + 0.06)^2 = $45,760

The future value of $35,000 received next year, after one year: 
$35,000 x (1 + 0.06)^1 = $37,100

The future value of $30,000 received two years from now: 
$30,000 x (1 + 0.06)^0 = $30,000

Now, we can add up these future values: 
$45,760 + $37,100 + $30,000 = $112,860

Therefore, the answer is B) $112,044.

Your Company Just Sold a Product with the Following Payment