You Have Some Property for Sale and Have Received Two

question 314

Multiple Choice

You have some property for sale and have received two offers. The first offer is for $189,000 today in cash. The second offer is the payment of $100,000 today and an additional $100,000 two years from today. If the applicable discount rate is 8.75%, which offer should you accept and why?

• A) You should accept the $189,000 today because it has the higher present value.
• B) You should accept the $189,000 today because it has the lower future value.
• C) You should accept the second offer because you will receive $200,000 total.
• D) You should accept the second offer because you will receive an extra $11,000.
• E) You should accept the second offer because it has a present value of $194,555.42.

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Definitions:

Orbital Life

The concept of living and working in space in orbit around Earth or another celestial body.

GEO

Stands for Geostationary Earth Orbit, a circular orbit 35,786 kilometers above the Earth's equator and following the direction of the Earth's rotation.

LEO

Low Earth Orbit; a satellite system orbiting relatively close to Earth, typically between 160 to 2,000 kilometers.

MEO

Medium Earth Orbit, a region of space around the Earth positioned at an altitude higher than low Earth orbit (LEO) and lower than geostationary orbit (GEO).