Bill is getting old so he would like to establish a trust fund that will provide $40,000 per

You have done a great job, and your boss offers you a few different possible gifts. Using a discount rate of 10%, which present would you choose?

Select one:

a. One payment of $47,500 received today

b. A single payment of $75,000 received in 5 years

c. $8,000 per year for 10 years, starting two year from now

d. All the presents stated are equally good!

e. A growing perpetuity that pays $2000 each year starting one year from now. The perpetuity grows at a rate of 1.5% per year.

Bill is getting old so he would like to establish a trust fund that will provide $40,000 per year indefinitely for his heirs, with the first payment occurring a year from today. The fund is expected to generate an annual return of 5%, compounded annually. How much money does Bill need to invest today so that he can provide this gift for his heirs?

Select one:

a. $721,154

b. $750,000

c. $780,000

d. $375,000

e. $800,000