Question

ONOFF Chap 5 Problems Due Friday by 11:59pm Points 15 Submitting a text entry box or a file upload Use the examples provided here to work on the following problems (make sure you show all your work) Problem 1: Gabrielle just won $2.75 million in the state lottery. She is given the option of receiving a total of $1,400,000 now, or she can elect to be paid $110.000 at the end of each of the next 25 years. If Gabrielle can earn 5% annually on her investments, from a strict economic point of view which option should she take? PMT I,000 Na5 5 Problem 2: Your firm has the option of making an investment in new software that will cost $278,367 today and is estimated to provide the savings shown in the following Year Savings estimate 1 $76,000 2 $106,400 3 $98,800 4 $53,200 5 $30,400 Should the firm make this investment if it requires a minimum annual return of 9% on all investments? Problem 3. For the mixed stream of cash flows shown in the following table, Year Cash flow stream $27,000 $22,500 $18,000 $ 9,000 $ 4,500

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D252 XVfC252 B252 250 Year! Cash flow | PVIF@9% 251 0 (278,367) 252 1$ 76,000 2532 106,400 254 3$ 98,800 255 453,200 256530,400 257 Present value 1.00000 S 0.91743 $ 0.84168 $ 0.77218 $ 0.70843 $ 0.64993$ (278,367.00) 69,724.77 89,554.75 76,291.73 37,688.2.2 19,757.9:1 258 Net present value$ 14,650.39 259 260 Yes, Investment should be made,