Shuai is 43 years old and has been asked to accept early retirement from his company. The company offered Shuai three alternative compensation packages to induce Shuai to retire: 1. $231,000 cash payment to be paid immediately. 2. A 20-year annuity of $22,000 beginning immediately. 3. A 10-year annuity of $75,000 beginning on July 1 of the year Shuai reaches age 53 (after 10 years). Required: Determine the present value of each alternative, assuming that Shuai is able to invest funds at a 8% rate. Whic alternative should he choose?

Shuai is 43 years old and has been asked to accept early retirement from his company. The company offered Shuai three alternative compensation packages to induce Shuai to retire: 1. $231,000 cash payment to be paid immediately. 2. A 20-year annuity of $22,000 beginning immediately. 3. A 10-year annuity of $75,000 beginning on July 1 of the year Shuai reaches age 53 (after 10 years). Required: Determine the present value of each alternative, assuming that Shuai is able to invest funds at a 8% rate. Whic alternative should he choose?

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter19: Deferred Compensation

Section: Chapter Questions

Problem 27P

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Shuai is 43 years old and has been asked to accept early retirement from his company. The company offered Shuai three alternative compensation packages to induce Shuai to retire: 1. $231,000 cash payment to be paid immediately. 2. A 20-year annuity of $22,000 beginning immediately. 3. A 10-year annuity of $75,000 beginning on July 1 of the year Shuai reaches age 53 (after 10 years). Required: Determine the present value of each alternative, assuming that Shuai is able to invest funds at a 8% rate. Which alternative should he choose? Note: Round your final answers to nearest whole dollar amount. Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Alternative 1 2 3 Shuai should choose PV
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