33. Determining the present value of a lump-sum future cash receipt Brooks Long

Question

33. Determining the present value of a lump-sum future cash receipt

Brooks Long expects to receive a $560,000 cash benefit when she retires four years from today. Ms. Long’s employer has offered an early retirement incentive by agreeing to pay her $361,000 today if she agrees to retire immediately. Ms. Long desires to earn a rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Calculate the present value. (Round your final answer to the nearest dollar amount.)

PRESENT VALUE ( )

Assuming that the retirement benefit is the only consideration in making the retirement decision, should Ms. Long accept her employer’s offer?

Brooks Long expects to receive a $560,000 cash benefit when she retires four years from today. Ms. Long’s employer has offered an early retirement incentive by agreeing to pay her $361,000 today if she agrees to retire immediately. Ms. Long desires to earn a rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Explanation / Answer

Calculation of the Present Value FV = PV (1+r)n PV = amount* PVAF, life, years PV = 560000*.683 PV = 382480 The best option is to receive four years later

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