A local pizzeria
buys a used car to make pizza
deliveries. It pays $2,000 down and $2,000 a year for two more
years. What is the present value of these payments at a 5% interest
rate?
Homework Answers
Present value=Cash flows*Present value of discounting factor(rate%,time period)
=2000+2000/1.05+2000/1.05^2
which is equal to
=$5718.82(Approx).
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