My Grades-P Question 3 (of 3) 3.00 points After completing·long and sucessful ca

Question

My Grades-P Question 3 (of 3) 3.00 points After completing·long and sucessful careerserior woe presiden for "ge bark,yo re prepring for retirement. After visilting the human resouroes office, you have found that you have severl netirement options to choose from a. An immediate cash payment of $1 million b. Payment of $92,000 per year for life. o. Payment of $82,000 per year for 10 years and then $95,000 per year for le (this option is intended to a Payment of S82,000pryrfor 10 years and then $86,000 per year for lile (this option is intended to give you some protection against infiation) You believe you can earn 8 percent on your investments and your remaining life expectancy is 20 years 1. Calculate to present value of each option. (FutumVaue o1. Present yabeors1. Eutumyak Annuity of $1. Present Value Annuity of $1.) (Use appropriate factorís) from the tables provided. Enter your answers in dollars but not in miltions) Oplion A Option B 1.000 000 Option C 2. Determine which option you prefer Option C 2 4

Explanation / Answer

Calculation of Present Values a. Present Value = 1000000 b. PV = 92000*PVAF., 8%, 20 years PV = 92000*10.01 Present Value = $ 92090 c PV = 82000*8%, 10 years+95000,8% ( 20-10 ) years PV = 82000*6.71+95000*3.30 PV = 551040+313500 PV = $ 864540 Option a is best due to higher present Values

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