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E11-6 Comparing Options Using Present Value Concepts [LO 11-S1] After hearing a knock at your front door, you are surprised t

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Answer #1

(1)

Option A:-

Amount Received * PV Annuity Factor (13%,20 years)

$1200000 * 7.02475 = $8429700

Option B:-

Received Today = $9000000

Option C:-

Received Today + Amount received for 20 years * PV Annuity Factor (13%,20 years)

$3000000 + ($900000 * 7.02475)

= $9322275

(2) Option C is preferable

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