| Denzel needs a new car. At the dealership, he finds the car that he likes. The dealership gives him two payment options: |
| 1. Pay $35,000 for the car today. |
| 2. Pay $4,000 at the end of each quarter for three years. |
| Required: | |
| 1-a. | Assuming Denzel uses a discount rate of 12% (or 3% quarterly), calculate the present value. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.) |
Answer : The prasent Value of the car is $ $ 74816
Working notes for the above answer is as under
| Quarter | PV factor @ 3% for the quarter |
Prasent Value |
||
| 0 | 35000 | 1 | 35000 | |
| Quarter | 1 | 4000 | 0.970874 | 3883.495 |
| Quarter | 2 | 4000 | 0.942596 | 3770.384 |
| Quarter | 3 | 4000 | 0.915142 | 3660.567 |
| Quarter | 4 | 4000 | 0.888487 | 3553.948 |
| Quarter | 5 | 4000 | 0.862609 | 3450.435 |
| Quarter | 6 | 4000 | 0.837484 | 3349.937 |
| Quarter | 7 | 4000 | 0.813092 | 3252.366 |
| Quarter | 8 | 4000 | 0.789409 | 3157.637 |
| Quarter | 9 | 4000 | 0.766417 | 3065.667 |
| Quarter | 10 | 4000 | 0.744094 | 2976.376 |
| Quarter | 11 | 4000 | 0.722421 | 2889.685 |
| Quarter | 12 | 4000 | 0.70138 | 2805.52 |
| 74816.02 | ||||
