Question

Check my work Check My Work button is now enabled5Item 5Item 5 4 points John Roberts is 50 years old and has been asked to accept early retirement from his company. The company has offered John three alternative compensation packages to induce John to retire: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

1. $179,000 cash payment to be paid immediately.

2. A 20-year annuity of $17,000 beginning immediately.

3. A 10-year annuity of $56,000 beginning at age 60.

Required: Determine the present value, assuming that he is able to invest funds at a 8% rate, which alternative should John choose? (Round your final answers to nearest whole dollar amount.)

Answer 1

Option as $ 179,000 cash paid immediately. Option 2 1 17,000 - A 20 your annuity beginning Immediately Annulty factor al 8% for 20 years - 9.81815. Present value of annuity &17,000 & 9-81815 20 yos) option 2 & 166909 optton 3 $ 56,000 & 10 year annuity beginning at age of 60. Annuing factor al 8). for 11-20 years. Ar at &t for 20 yrs - Af at at. for 10 yrs 9-81815 - 6.41008 3.10807 potion 37 Present value of 23.10807 x 56000! 10 мү ам илем Ј • $ 174052 sence option 1 has highest present value.. alect option 1 & 179,000 cash immediately