Your grandfather would like to share some of his fortune with you. He offers to give you
Question:
Your grandfather would like to share some of his fortune with you. He offers to give you money under one of the following scenarios (you get to choose):
1. $ 8,750 per year at the end of each of the next seven years
2. $ 50,050 (lump sum) now
3. $ 100,250 (lump sum) seven years from now
Requirement
1. Calculate the present value of each scenario using a 6% discount rate. Which scenario yields the highest present value? Round to nearest whole dollar.
2. Would your preference change if you used a 12% discount rate?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Horngrens Financial and Managerial Accounting
ISBN: 978-0133255584
4th Edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
Question Posted: