A plaintiff in a successful lawsuit was awarded a judgment of $4800 per month for 5 years. The plaintiff has the need of a fairly large sum of money immediately for an investment of his own, and has offered the defendant the opportunity to pay off the award in a lump-sum amount of $110,000. If the defendant accepts the offer and pays the $110,000 now, what rate of return will the defendant have made by not paying the 60 monthly amounts?

58.81% annual

or 3.93% monthly

Explanation:

Using a financial calculator, we can determine the internal rate of return of this investment. The initial outlay is -$110,000, and the 60 $4,800 cash flows follow. The IRR is 3.93 per month. In order to determine the effective annual rate, we can use the following formula:

effective annual rate = (1 + 3.93%)¹² - 1 = 58.81%

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"we first find value of tax in dollars.

the difference between the two prices   is: 23. 54 - 22 = 1.54

therefore the sales tax in dollars is 1.54

the tax % will be   (amount of tax / original cost price ) × 100

(1.54 / 22) × 100  → (0.07) × 100 =   7

so the tax rate is 7%

we can double check the answer.

7 % of 22   → (7/100) × 22 → 0.07 × 22 = 1.54

22 + 1.54 = 23.54"