Mike has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $800. Mike discovers, that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $300 in order to make the boat worth $800 to potential buyers. He can sell the boat as is now for $300. What should he do

Mike should complete the repairs and sell off the boat for $800

Explanation:

Mike has already spent $600 purchasing and repairing the boat. He still needs to make an additional repair of $300. This means the cost price of the boat will be:

Cost price = $600 + $300 = $900

Selling price = $800

His loss would be:

$900 - $800 = $100

But without making the additional repair, the boat's worth is $300. This means that

Cost price = $600

Selling price = $300

His loss would be:

$600 - $300 = $300

From the above calculations, if the additional repair is done, Mike's loss would be lesser.

Therefore, the best option Mike should take is to complete the repairs and sell off the boat for $800

$129.35

Explanation:

Here is the full question :

What is the present value of an annuity of $27 received at the beginning of each year for the next six  years? The first payment will be received today, and the discount rate is 10%

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow each year from year 0 to 5 = $27

I = 10%

PV = $129.35

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute