T2 EIC 4 (Lecture)

Tim is also trying to make the best choice between a pre-paid mobile plan and a monthly plan. He is considering a one month pre-paid plan of $50, payable today or a $52 monthly plan, payable at the end of the month. 

He is currently earning 5% p.a. (per annum) interest on a term deposit and realises that his expenses are made at the sacrifice of investable capital. So the 5% p.a. return he sacrifices for paying for expenses like the mobile phone is an opportunity cost that can be used as a discount rate to work out the time value of money, present value cost of the $52 monthly plan, today.

Using a discount rate of 5% p.a., the present value cost of $52 paid in 1 month's time is...? 

(Note: If you have not completed the Excel Classworkbook setup as required in Video Lecture B, you will not be able to complete this KCT.)

(enter your answer to 2 decimal places, with no units, i.e. with no $ or commas. e.g. an appropriately formatted answer is 43.21. Make sure you use the guidance in KCT3 to calculate  and enter your monthly discount rate into Excel correctly)