Assume a 6-Year Franchise Is Expected to Generate Profit at the Rate

question 15

Multiple Choice

Assume a 6-year franchise is expected to generate profit at the rate of $\sqrt [ 3 ] { t ^ { 2 } + 19,000 }$ dollars per year.If,over the next 6 years,the prevailing annual interest rate remains fixed at 7%,compounded continuously,what is the present value of the franchise? Use Simpson's rule with n = 6 to approximate the integral.Round your answer to two decimal places.

• A)$1,123.47
• B)$561.73
• C)$374.49
• D)$337.04

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Definitions:

Economic value

The worth of a good or service as determined by the market and the price a buyer is willing to pay.

Compounded quarterly

Interest calculation method where the interest is added to the principal every three months, affecting the overall amount on which future interest is calculated.

Perpetuity

An annuity in which payments continue indefinitely, typically at a fixed rate.

Compounded semi-annually

Accumulation method for interest where the interest is applied to the principal twice a year, thereby influencing the total amount of interest earned or paid.