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TB MC Qu. 09-10 Sharon Smith will receive... Sharon Smith will receive $1.23 million in 30 years. The discount rate is 9%. As

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Answer #1

We first need to compute the PV of the amount that could be received in future.

This question requires application of basic time value of money function, according to which FV = PV * (1 + r) where FV is F

1,230,000 = PV + (1+0.09) 30

PV = 1,230,000/13.26768

PV = $92,706.50

Given PV of this amount (receivable in future) is higher (than amount receivable today), choose this amount (option 1).

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