Question: You are considering the purchase of that beautiful red Ferrari 550 Maranello (see below). You are certain you can sell it for $200, 000 two years from now. Your required rate of return (R) is 15%, so you need to decide on the price you would be willing to pay today for the car. In order to compute the price today, you will make which of the following calculations?
i. Multiply $200, 000 by 1.3225
ii. Multiply $200, 000 by 1.15
iii. Divide $200, 000 by 1.3225
iv. Divide $200, 000 by 15% to the power of 2.
v. Divide $200, 000 by 2 and then divide that result by 1.15