FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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George has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $126,000 cash
payment today. The second option is to receive $22,600 at the end of each of the next 19 years and a $30,800 lump sum payment in
the 20th year. George can invest money at a 7% rate.
Click here to view the factor table.
(a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided
and round final answer to O decimal place, e.g. 58,971.)
Present value $
Option 2
Which option should George choose to receive his winnings?
Present value
Option 1
$
Option 2
126000
(b) If George could invest money at 10%, calculate the present value of the two options. (For calculation purposes, use 4 decimal places as
displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.)
Which option should he choose?
Option 1
$
126000
Option 2
241552.32
Option 2
196993.28
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Transcribed Image Text:George has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $126,000 cash payment today. The second option is to receive $22,600 at the end of each of the next 19 years and a $30,800 lump sum payment in the 20th year. George can invest money at a 7% rate. Click here to view the factor table. (a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.) Present value $ Option 2 Which option should George choose to receive his winnings? Present value Option 1 $ Option 2 126000 (b) If George could invest money at 10%, calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.) Which option should he choose? Option 1 $ 126000 Option 2 241552.32 Option 2 196993.28
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