Your manufacturing firm has just secured a sale to the federal government with payment of $450,000 due in nine months
You have asked your bank for cash today with the stipulation that you will give the proceeds from the government contract to the bank in nine months. The bank has agreed to your request if you allow them to discount the cash flows at an annual rate of 8%. How much will the bank pay you today under this agreement?
A) $424,761
B) $423,889
C) $476,739
D) $450,000
Answer: A
Explanation: A) PV = = = $424,761.06
MODE = END
INPUT .75 8 ? 0 -450,000
KEY N I/Y PV PMT FV
CPT 424,761.06
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