Homework Answers
Answer 1.
Option A - 1.1 million received for next 20 years
= PV of $1.1 million received for next 20 years
= $1.1 million × PVAF(14%, 20)
= $1,100,000 × 6.6231
= $7,285,410
Option B $8.5 million in Present = $8,500,000
Option C $2.5 million Today and receive $800,000 for 20 years
PV = $2.5 million + $800, 000 × PVAF(14%, 20)
= $2,500,000 + ($800,000 × 6.6231)
= $2,500,000+ $5,298,480
= $7,798,480
Answer 2 - Option B $8.5 million in
Present
Since PV of money is highest in Option(B), it is profitable to have
$8.5 million today
Please check the Solution i have used the Present Value of annuity table with 4 digits after decimals. if you have different one, final answer may vary. So if any problem Please comment me. Thanks
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