An aircraft company has signed a contract to deliver a plane 3 years f
An aircraft company has signed a contract to deliver a plane 3 years from now. The price they will receive at the end of 3 years is $20 million. If the firm’s cost of capital is 6%, what is the present value of this payment?
What will be an ideal response?
ANSWER
PV = 20/(1.06)3 = $16.79 million
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