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A financial company that advertises on television will pay you $52,000 now for annual payments of $10,000 that you are expected to receive for a legal settlement over the next 8 years. Use Exhibit 1-D a. What is the present value of the annual payments if you estimate the time value of money at 10 percent? (Round your PVA factor to 3 decimal places and final answer to the nearest whole dollar.) Present value b. Should you accept this offer? No O Yes

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Years Cash flows Discounting factor Discounted cash flows 10,000 0.909 9,091 10,000 0.826 8,264 10,000 0.751 7,513 4 10,000 0.683 6,830 10,000 0.621 6,209 10,000 0.564 5,645 10,000 0.513 5,132 10,000 0.467 4,665 4 Present value 53,349 Since present value of the offer turns out to $53,349 which is more than what the co. wishes to pay now i.e. $52,000 Hence, we should not accept this offer-C2+1 Years Cash floYs Discounting factor Discounted cash tlows E2+1 u000 1/(1+10%)AF2 -F3 F4 -H2+1 UUCO 1/(1+10%)^12 -13 14 D2+1 F2+1 G2+1 ODU0 1/(1+10%)AH2 -H3 H4 =12+1 10000 10DDU 10ODU 1/1+10%)AC2 -C3*C4 1/(1+10%)AD2 -D3 D4 1/(1+10%ME2 -E3 E4 1/ 1 +1096MG2 -G3 G4 1/ 1+10%)^12 t value -SUM(C5: Since present value of the offer turns out to $53,349 which is more than what the co. wishes to pay now i.e. $52,000 Hence, we should not accept this offer 10

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