5-21 EVALUATING LUMP SUMS AND ANNUITIES. Kristina just won the lottery, and she must choose among three award options. She can elect to receive a lump sum today of $62 million, to receive 10 end- of-year payments of $9.5 million, or to receive 30 end-of year payments of $5.6 million. a. If she thinks that she can earn 7% annually, which should she choose? b. If she expects to earn 8% annually, which is the best choice? c. If she expects to earn 9% annually, which option would you recommend?

5-21 EVALUATING LUMP SUMS AND ANNUITIES. Kristina just won the lottery, and she must choose among three award options. She can elect to receive a lump sum today of $62 million, to receive 10 end- of-year payments of $9.5 million, or to receive 30 end-of year payments of $5.6 million. a. If she thinks that she can earn 7% annually, which should she choose? b. If she expects to earn 8% annually, which is the best choice? c. If she expects to earn 9% annually, which option would you recommend?

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money

Section: Chapter Questions

Problem 9.20MCE

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5-21 EVALUATING LUMP SUMS AND ANNUITIES Kristina just won the lottery, and she must choose among three award options. She can elect to receive a lump sum today of $62 million, to receive 10 end-of-year payments of $9.5 million, or to receive 30 end-of-year payments of $5.6 million. a. If she thinks she can earn 7% annually, which should she choose? b. If she expects to earn 8% annually, which is the best choice?
5-21 EVALUATING LUMP SUMS AND ANNUITIES. Kristina just won the lottery, and she must choose among three award options. She can elect to receive a lump sum today of $62 million, to receive 10 end- of-year payments of $9.5 million, or to receive 30 end-of year payments of $5.6 million. a. If she thinks that she can earn 7% annually, which should she choose? b. If she expects to earn 8% annually, which is the best choice? C. If she expects to earn 9% annually, which option would you recommend? d. Explain how interest rates influence her choice. 6
e She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70. c. She If her investments continue to earn the same rate, how much will she be able to withdraw at the end of each year after retirement at each retirement age? Problem 5 EVALUATING LUMP SUMS AND ANNUITIES. Crissie just won the lottery, and she must choose between three award options. She can elect to receive a lump sum today of $61 million, to receive 10 end-of-year payments of $9.5 million, or to receive 30 end-of-year payments of $5.5 million. a. If she thinks she can earn 7% annually, which should she choose? b. If she expects to earn 8% annually, which is the best choice? c. If she expects to earn 9% annually, which option would you recommend? d. Explain how interest rates influence the optimal choice. Problem 6 PV OF A CASH FLOW STREAM. A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10%. He has been offered three possible 4-year contracts. Payments…
19. Lucky Lynn has a choice between receiving $1,000 fromn her great-uncle one year from today or $900 from her great-aunt today. She believes she could invest the $900 at a one-year return of 12%. ME AND RESOURCE ALLOCATION a. What is the future value of the gift from her great-uncle upon receipt? From her great-aunt? b. Which gift should she choose? c. How does your answer change if you believed she could invest the $900 from her great-aunt at only 10%? At what rate is she indifferent? invoct in
Shelley wants to cash in her winning lottery ticket. She can either receive twelve, $199,000 semiannual payments starting today, or she can receive a single-amount payment today based on a 6% annual interest rate. What is the single-amount payment she can receive today? Multiple Choice $1,173,406. $2,040,271. $1,345,180. $1,264,677.
1. Natalie won the lottery and is deciding between the options of receiving the annual payment option of $450,000 per year for 25 years beginning today, or receiving one lump-sum amount today. Natalie can earn 5% investing this money. At what lump-sum payment amount would she be indifferent between the two alternatives? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Kristina just won the lottery, and she mustchoose among three award options. She can elect to receive a lump sum today of $62 million, to receive 10 end-of-year payments of $9.5 million, or to receive 30 end-of-year payments of $5.6 million.a. If she thinks she can earn 7% annually, which should she choose?b. If she expects to earn 8% annually, which is the best choice?c. If she expects to earn 9% annually, which option would you recommend?d. Explain how interest rates influence her choice.
Question 4 of 5 Millet wants to provide a P200,000 graduation gift for her daughter Mae who is now 16 years old. She would like the fund to be available by the time she is 20 years of age. She decides on an investment that pays 10% compounded quarterly. How large must the deposit be? Select the correct response: Millet must deposit at least P136,000.00. Millet must deposit at least P138,000.00. O Millet must deposit at least P135,000.00. Millet must deposit at least P137,000.00.
Ethan is creating a college investment fund for his daughter. He will put in $21,000 per year for the next 17 years and expects to earn a 12% annual rate of return. How much money will his daughter have when she starts college? Use Appendix C to calculate the answer. Multiple Choice $1,014, 538 $1,015,551 $1,027,291 $1,026,564
Kristina just won the lottery, and she must choose among three award options. She can elect to receive a lump sum today of $60 million, to receive 10 end-of-year payments of $9.1 million, or to receive 30 end-of-year payments of $5.3 million. a. If she thinks she can earn 7% percent annually, which should she choose? -Select- b. If she expects to earn 8% annually, which is the best choice? -Select- c. If she expects to earn 9% annually, which option would you recommend? -Select- d. Explain how interest rates influence her choice. -Select-
16 Mary Alice just won the lottery and is trying to decide between the options of receiving the annual cash flow payment option of $390,000 per year for 25 years beginning today, or receiving one lump-sum amount today. Mary Alice can earn 6% investing this money. At what lump-sum payment amount would she be indifferent between the two alternatives? Note: Use tables, Excel, or a financial calculator. Round your final answer to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1,PVA of $1, FVAD of $1 and PVAD of $1)
A 40-year-old woman decides to put funds into a retirement plan. She can save $3,000 a year and earn 7 percent on this savings. How much will she have accumulated if she retires at age 65? Use Appendix C to answer the question. Round your answer to the nearest dollar.$ At retirement how much can she withdraw each year for 25 years from the accumulated savings if the savings continue to earn 7 percent? Use Appendix D to answer the question. Round your answer to the nearest dollar.$ Appendix C