Moe Szyslak comes to you for financial advice. He is considering adding video games to his tavern to attract more customers. The company that sells the video games has given Moe a choice of four different payment options. Which of the following four options would you recommend that Moe choose? Why?

Option 1. Pay $5,900 cash immediately.

Option 2. Pay $6,750 cash in one lump sum two years from now.

Option 3. Pay $800 at the end of each quarter for two years.

Option 4. Pay $1,000 immediately plus $5,250 in one lump sum two years from now.

Moe tells you he can earn 6 percent annual interest, compounded quarterly, on his money. You have no reason to question his assumptions.

Answer rating: 100% (QA)

Solution Computation of present value of each options Option ... View the full answer