You are in talks to settle a potential lawsuit. The defendant has offered to make annual...

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You are in talks to settle a potential lawsuit. The defendant has offered to make annual payments of $31,000, $35,000, $72,00

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Answer 1

Answer #1

Value of the settlement offer today = $\sum_{i=1}^{n}$ [CF(i) / (1 + r)ⁱ]

= [$31,000 / (1 + 0.053)] + [$35,000 / (1 + 0.053)²] + [$72,000 / (1 + 0.053)³] + [$108,000 / (1 + 0.053)⁴]

= $29,439.70 + $31,565.40 + $61,666.23 + $87,843.63 = $210,514.95

Hence, 5th Option is correct.

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Answer 2

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