Answer to Question #324307 in Management for Bea

Question

 A new machine is worth R50 000, but she does not really have the capital now to replace the machine. Her brother owns such a machine and has indicated that he will give it to her now with payment only due in three years. He is willing to let her take the machine for R75 000 at an interest rate of 15% per year.She has approached you to assist her and you advise her that she will need to look at the present value of the machine before decidin

Select one:

a.The lower the interest rate is, the smaller the present value of a given future amount will be.

b.The higher the interest rate is, the bigger the present value of a given future amount will be.

c.The higher the interest rate is, the smaller the present value of a given future amount will be.

d.The lower the interest rate is, the bigger the present value of a given future amount will be