Time value of money and interest rates

Reference no: EM1327389

Company A purchases obsolete inventory and re-sells it on-line. Company A learns that Company B is selling some obsolete inventory for $100,000. Company A wants to purchase the inventory immediately, but cannot pay afford the $100,000 price tag until one of its other investments matures and becomes available in two years. In exchange for obtaining the obsolete inventory now, Company A offers to pay Company B $121,000 in two years.

Assuming interest rates remain at 10% over the next two years, should Company B accept Company As offer?

Why or why not? Explain.

Reference no: EM1327389

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