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Elementary,Middle School,High School,College,University,PHD
| Teaching Since: | May 2017 |
| Last Sign in: | 402 Weeks Ago, 6 Days Ago |
| Questions Answered: | 66690 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
I was wondering if I can get help with a question on my homework please. Eichelberger Trucking won a settlement in a lawsuit and was offered four different payment alternatives by the defendant's insurance company. The interest rate is 8%. Ignoring tax considerations, which of the following four alternatives has the highest present value (and thus is the best option)? Support your answer with the appropriate calculations. 1) $180,000 now 2) $52,000 per year for the next 4 years (end-of-year payments) 3) $5,000 now and then $24,000 per year for the enxt 10years(end of year payments). Hint: calculate the present value of the initial P00 separately. Then calculate the present value the $24,000 annuity separately. Finally, add the two present value amounts together to get the overall present value. 4)$9,100 per year for the next 10 years (end of year payments) plus a lump sum payment of $200,000 at the end of the 11th year. Hint: calculate the present value of the $9,100 10-year annuity separately. Then calculate the present value the $200,000 payment received at the end of year 11 separetely. Finally, add the two present value amounts together to get the overall present value.
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