If money is worth 12%, would you prefer receiving $200,000 now or $30,000 each year for the next 10 years?
1. What is the value of each amount 10 years from now?
2. What is today’s present value of each amount?
3. How much would you have to receive each year to be equivalent to receiving $200,000 today?
4. If you receive $30,000 each year instead of the $200,000 amount, what is the effective interest rate or the IRR (internal of return)?