Receiving Options
a) $1,000,000 NOW. So PW will be remains same.
b) $1,400,000 at the end of 5 years. Interest = 5%
PW = $1,400,000 (1 + 0.05) – 5 = $1,096,936.6
c) $75,000 per year in perpetuity (n=infinity)
PW = A/interest
PW = $75,000/0.05 = $1,500,000
d) $150,000 per year for 10 years
PW = $150,000 (P/A, 5%, 10)
PW = $150,000 (7.72173) = $1,158,259.5
Ranking from most to least
c) PW = $1,500,000
d) PW = $1,158,259.5
b) PW = $1,096,936.6
a) PW = $1,000,000
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