Answer:
d) $299,574
Explanation:
This will be the future value of an annuity-due. That means Payments are made at the beginning of the period, becasue you are going to receive the first payment of 25,000 the same day you adquire the mine.
The way to calcualte this will be doing the present value of common annuity of $25,000 for 25 years and then multiply it by (1+ rate) = 1.075
The present value of that will be $278,613.75
now we multiply by (1+rate) x 1.075
equals to $299,574.17
You should ask for $299574 if you decide to sell it.
This will be a future value of an annuity due.
That means payments are made at the beginning of the period because you are going to receive the first payment of 25,000 the same day you acquire the mine.
The way to calculate this will be doing the present value of a common annuity of $25000 for 25 years and then multiplying by (1+rate)
As The present value will be [tex]\$278,613.75[/tex]
So, now we will multiple the above with (1+rate);
[tex]=\$278,613.75*(1+0.075)=\$278,613.75*1.075[/tex]
[tex]=\$299,574[/tex]
Hence,the correct answer is option (d) $299,574.
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