Answer to Question #26704 in Economics of Enterprise for japhet
In our case, FV = PV + 6000, so we get:
PV + 6000 = PV*1.07^5
1.4026PV - PV = 6000
0.4026PV = 6000
PV = 6000/0.4026 = $14,904.92
We advice John to proceed with this transaction, as he will gain the significant profit. But if he has another more attractive offer, it's better not to proceed with this.
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