Question

You have just learned that you are a beneficiary in the will of your late Aunt Susan. The executrix of her estate has given you three options as to how you may receive your inheritance. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: 1- Calculate the present value for the following assuming that the money can be a. invested at 14% percent. (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.) Present Value $ $ a. You may receive $60,000 immediately. b. You may receive $83,000 at the end of thirteen years. You may receive $17,000 at the end of each year for thirteen years (a Citotal of $221,000). If you can invest money at a 14% return, which option would you prefer? b. Option a Option b Optionc

Answer 1

Answer:

1a) Calculate present value

a) Present value = $60,000

b) Present value (use PV factor at 14%, 13 yearend) = $83,000*0.1821 = $15,114

c) Present value (use PV Annuity factor at 14%, 13 years end) = $17000*5.8424 = $99,321

1b) Option C