Thank you for visiting A major landscape contractor has offered to buy all 10 000 of the flowering dogwood trees for 28 000 to be paid immediately However the. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
Final answer:
Jake should calculate the present value of $28,000 at his required rate of return of 10% over three years. If the present value is greater than or equal to the cost of producing or buying the trees on the open market in three years, he should accept the offer.
Explanation:
The student's question deals with a financial decision-making scenario where Jake has to decide whether to accept an offer to sell 10,000 flowering dogwood trees at a price of $28,000, which would be paid immediately, but delivery is expected in three years. In assessing whether Jake should accept the offer, we need to determine if the present value of the offer equals or exceeds Jake's cost, including his required rate of return of 10%. The key to making a sound decision involves calculating the present value of the offer using discount rates and comparing it with the future cost of delivering the trees, potentially at a higher market price.
To analyze if the offer is favourable, Jake should calculate the present value of $28,000 using the formula for present value:
PV = FV / (1 + r)^n
where PV is the present value, FV is the future value ($28,000), r is the annual discount rate (10%), and n is the number of years (3). If the calculated present value is greater than or equal to the cost of producing or possibly buying the trees on the open market in three years, he should consider accepting the offer. However, if the present value is less than the cost, it would not meet his required rate of return and accepting the offer may not be financially sound.
Thank you for reading the article A major landscape contractor has offered to buy all 10 000 of the flowering dogwood trees for 28 000 to be paid immediately However the. We hope the information provided is useful and helps you understand this topic better. Feel free to explore more helpful content on our website!
- You are operating a recreational vessel less than 39 4 feet long on federally controlled waters Which of the following is a legal sound device
- Which step should a food worker complete to prevent cross contact when preparing and serving an allergen free meal A Clean and sanitize all surfaces
- For one month Siera calculated her hometown s average high temperature in degrees Fahrenheit She wants to convert that temperature from degrees Fahrenheit to degrees
Rewritten by : Jeany
