After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, well-known magazine subscriptioncompany. It has arrived with the good news that you are the big winner, having won $24 million. You have three options:a. Receive $1.2 million per year for the next 20 years.b. Have $9 million today.c. Have $3 million today and receive $900,000 for each of the next 20 years.Your financial adviser tells you that it is reasonable to expect to earn 13 percent on investments.Required:1. Calculate the present value of each option. (Euture Value of $1.Present Value of $1. Euture Value Annuity of $1. Present ValueAnnuity of $1.)2. Determine which option you prefer.Complete this question by entering your answers in the tabs below.Required 1 Required 2Calculate the present value of each option. (Future Value of $1,Present Value of $1, Future Value Annuity of $1,Present Value Annuity of $1.)Note: Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar, Enter youranswers in dollars, not in millions.Present ValueShow less A

The concept of time value of money (TVM) states that money accessible now is valued more than the…

Answered: a. Receive $1.2 million per year for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You have invested P100,000 in a mutual fund that promises to pay 8% each year. You will keep this for 10 years and then cash out the total value. The cost to close the mutual fund account by then is expected to be P5,000. If your minimum return from this investment is 7%, compute for your cost of illiquity with regard to the investment.
You plan to retire in 20 years. Use present value tables to calculate whether it is better for you tosave $25,000 a year for the last 10 years before retirement or $15,000 for each of the 20 years.Assume you are able to earn 10 percent interest on your investments. Round to the nearest dollar.
5. If you invest $12,000 today, how much will you have: In 6 years at 7 percent? In 15 years at 12 percent? C. In 25 years at 10 percent? d. In 25 years at 10 percent (compounded semiannually)? a. b.
Suppose that you have an opportunity to invest in a fund that pays 12% interest compoundedannually. Today, you invest P10,000 into this fund. Three years later, you borrow P5,000 from alocal bank at 10% effective annual interest and invest it in the fund. Two years later, you withdrawenough money from the fund to repay the bank loan and all interest due on it. Three years laterfrom this withdrawal you start taking P2,000 per year for 5 years out of the fund. After 5 years, youhave withdrawn your original P10,000. The amount remaining in the fund is earned interest. Howmuch remains?
Your group receives a phone proposal to invest in a new business. Thecaller informs you that it will take a $70,000 down payment and the investmentwill return $10,000 a year for the next 10 years. He tells you that theinvestment will return 14 percent. If current interest rates are 8 percent,what is the present value of this investment? How did the caller get14 percent?
What would you pay for an investment that pays you $30,000 at the beginning of each year for the next ten years? Assume that the relevant interest rate for this type of investment is 8%.
Help me please
JAX, Inc. has been offered the opportunity of investing $128,729 now. The investment will earn 8% per year and at the end of its life will return $600,000 to JAX.. How many years must JAX wait to receive the $600,000?
If you invest $9500 per period for the following number of periods, how much would you have in each of the following instances. In 13 years at 10 percent? In 50 years at 9 percent
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a. Receive $1.2 million per year for the next 20 years. b. Have $9 million today. c. Have $3 million today and receive $900,000 for each of the next 20 years. Your financial adviser tells you that it is reasonable to expect to earn 13 percent on investments.