Edward Hughes has just won the state lottery and has the following three payout options for after−tax prize​ money:   1. $164,000 per year at the end of each of the next six years 2. $312,000 ​(lump sum) now 3. $520,000 ​(lump sum) six years from now   The annual discount rate is​ 9%. Compute the present value of the second option.​

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Edward Hughes has just won the state lottery and has the following three payout options for
after−tax
prize​ money:
 
1.
$164,000
per year at the end of each of the next six years
2.
$312,000
​(lump sum) now
3.
$520,000
​(lump sum) six years from now
 
The annual discount rate is​ 9%. Compute the present value of the second option.​ (Round to nearest whole​ dollar.)
 
Present value of​ $1:
 
​8%
​9%
​10%
1
0.926
0.917
0.909
2
0.857
0.842
0.826
3
0.794
0.772
0.751
4
0.735
0.708
0.683
5
0.681
0.650
0.621
6
0.630
0.596
0.564
7
0.583
0.547
0.513
 
 
 
 
A.
$312,000
 
B.
$104,000
 
C.
$416,000
 
D.684,000
 
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