please do them all so I can understand Question 1 (1 point) A vendor is offering

Question

please do them all so I can understand

Question 1 (1 point) A vendor is offering an extended repair contract on a machine. The firm's experience is that this will cover repair costs over the next 4 years of $200, $200, $400, and $500. At 6% what is the extended repair contract worth now? O $500 O $1164 O $1300 O $1099 Save Question 2 (1 point) What is the present worth of the project that requires $100,000 investment now and receives $30,000 every year for five years at an interest rate of 12%? O $7,271 O $8,143 O $30,000 O $50,000 Save

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

1)

The value of contract today is the present value of all repair costs to be done in future discounted at the current discount rate

Present value Factor

= 1 / (1 + r) ^ n

Where,

r = Rate of discount = 6% or 0.06

n = Years 1 to 4

So, PV Factor for year 2 will be

1 / (1.06 ^ 2)

= 1 / 1.1236

= 0.889996

The following table shows the calculations

So, as per above calculations, option D is the correct option

Calculations Years 1 2 3 4 A Costs 200 200 400 500 B PV Factor 0.943396226 0.88999644 0.839619283 0.792093663 C = A x B Present Value 188.68 178.00 335.85 396.05 D = Sum C Net Present Value               1,099

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