You have just won the state lottery and have two choices for collecting your winnings. You can collect $108,000 today or receive $21,300 at the end of each year for the next seven years. A financial analyst has told you that you can earn 9% on your investments. Required: 1. Calculate the present value of both the options (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answers to nearest whole dollar.) Present Value Option 1 Option 2 24 108,000 2. Which alternative should you select? O Option 1 O Option 2

You have just won the state lottery and have two choices for collecting your winnings. You can collect $108,000 today or receive $21,300 at the end of each year for the next seven years. A financial analyst has told you that you can earn 9% on your investments. Required: 1. Calculate the present value of both the options (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answers to nearest whole dollar.) Present Value Option 1 Option 2 24 108,000 2. Which alternative should you select? O Option 1 O Option 2

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Rako
Please help me. Fast solution please Thankyou.
1. What will be the present value, if $6,800 is discounted back 4 years at an interest rate of 4% compound semi-annually? 2. as the Fund manager for bank of Trinidad and Tobago Limited, you are to advise the following two clients based on their respective financial situations a) your best friend has asked to assist him in making the best investment out of the following options. which would you advise him to choose and why Option 1 $12,000 in 5 year's time at 6% interest Option 2 $15,000 in two year's time at 9% Option 3 $15,000 today. no strings attached Option 4 $5,000 each year for 2 years at 7% percent compounded semi- anually
You are considering two investment options. In option A, you have to invest RM4000 now and RM1000 three years from now. In option B. you have to invest RM2500 now, RM1500 a year from now, and RM1000 three years from now. In both options, you will receive four annual income of RM3000 each. (You will get the first payment a year from now.) Which of these options would you choose based on (a) the conventional payback criterion, and (b) the present worth criterion, assuming 13% interest? Based on conventional payback period method, choose either (A/B/Both) PW Option A PW Option B Based on PW analysis method, choose Option (A or B) Submit :A : 9290.7 : 6602.9 :A Format Format Format Format
You have just won the lottery and must decide between $3,000,000 paid in 20 annual payments of $150,000 with the first payment coming one year from today or a lump sum payment today. If fair market interest rates are 7% what lump sum payment today is equivalent to the annual $150,000 payments? Round your answer to the nearest dollar.
Your uncle offers you a choice of $106,000 in 10 years or $43,000 today. Use Appendix B as an approximate answer, but calculate your final answer using the formula and financial calculator methods. a-1. If money is discounted at 9 percent, what is the present value of the $106,000? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Present value a-2. Which offer should you choose? $106,000 after 10 years O $43,000 today
You are considering two investment options. In option A, you have to invest $4,500 now and $700 three years from now. In option B, you have to invest $3,700 now, $1,900 a year from now, and $900 three years from now. In both options, you will receive four annual payments of $1,800 each. (You will get the first payment a year from now.) Which of these options would you choose based on (a) the conventional payback criterion, and (b) the present worth criterion, assuming 8% interest? Assume that all cash flows occur at the end of a year. Click the icon to view the interest factors for discrete compounding when i = 8% per year. ..... (a) The conventional payback period for option A is 3 years. (Round to the nearest whole number place.) The conventional payback period for option B is 4 years. (Round to the nearest whole number place.) Which of these options would you choose based on the conventional payback criterion? Choose the correct answer below. O A. Option B O B. Both options are…
You are going to invest in a stock mutual fund with a front-end load of 6 percent and an expense ratio of 1.39 percent. You also can invest in a money market mutual fund with a return of 2.6 percent and an expense ratio of 0.10 percent. If you plan to keep your investment for 2 years, what annual return must the stock mutual fund earn to exceed an investment in the money market fund? What if your investment horizon is 9 years? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. 2 Years 9 Years Annual Return % %
Assume you won a million dollars in the Texas Lottery. You have two options: 1) collect S426,000 now or 2) receive $50,000 a year (end-of-year) for the next 20 years. Which option would you opt for assuming a 10% interest rate? Use an Excel formula to justify your choice.
Future value (with changing interest rates). Jose has $3,000 to invest for a 6-year period. He is looking at four different investment choices. What will be the value of his investment at the end of 6 years for each of the following potential investments? a. Bank CD at 3%. b. Bond fund at 7.5%. c. Mutual stock fund at 14%. d. New venture stock at 21%. a. What will be the value of Jose's bank CD investment that offers an annual rate of return of 3% for 6 years? (Round to the nearest cent.) $
You are planning to save enough to retire in 40 years. To do this, you will invest $1,000 at the end of each month in a stock account and $500 at the end of each month in a bond account. The stock account is expected to give 8% APR, compounded monthly. The bond account is expected to give 4% APR, also compounded monthly. When you retire, you will combine the two accounts and invest in an account that will earn 6% APR. How much will you withdraw from your post-retirement account every month if your withdrawal period is 25 years?
Suppose you just won the state lottery, and you have a choice between receiving $2,550,000 today or $270,000 a year for 18 years, with the first payment starting one year from today. What annual interest rate does the second choice provide? 6.75% 7.49% 7.89% 6.28%