# 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?

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**Related Book For**

## Horngrens Financial and Managerial Accounting

**ISBN:** 978-0133255584

4th Edition

**Authors:** Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura