Three Payments Are Scheduled as Follows: $1,200 Is Due Today

question 173

Short Answer

Three payments are scheduled as follows: $1,200 is due today, $900 is due in five months, and $1,500 is due in eight months. The three payments are to be replaced by a single equivalent payment due ten months from now. What should the payment be if money is worth 5.9%? Use ten months from now as the focal date.

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Definitions:

Downstream Cost

Expenses incurred after the production phase, such as distribution and marketing costs.

Quality Check

The process of inspecting products or services to ensure they meet the required quality standards before being delivered to customers.

Wine Production

The process of cultivating grapes and converting them into wine through fermentation, aging, and bottling, involving both agricultural and industrial activities.

Downstream Cost

Expenses incurred after the primary production phase, including distribution, marketing, and customer service costs, that are part of bringing a product to market.