Fiona has a four-year contract to sell coffee in a local office building. After two years in business, she wants to move on. Kurt wants to buy out the last two years of Fiona’s contract. He estimates he can make $7,500 in the first year and $7,800 in the second year. If the discount rate is 8%, what is the maximum amount Kurt should be willing to pay?
Fiona has a four-year contract to sell coffee in a local office building. After two years in business, she wants to move on. Kurt wants to buy out the last two years of Fiona’s contract. He estimates he can make $7,500 in the first year and $7,800 in the second year. If the discount rate is 8%, what is the maximum amount Kurt should be willing to pay?
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter27: Time Value Of Money (compound)
Section: Chapter Questions
Problem 6E
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Fiona has a four-year contract to sell coffee in a local office building. After two years in business, she wants to move on. Kurt wants to buy out the last two years of Fiona’s contract. He estimates he can make $7,500 in the first year and $7,800 in the second year. If the discount rate is 8%, what is the maximum amount Kurt should be willing to pay?
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