ou are surprised to see the large mapszine ubsonigin company. t eh the pood new

Question

ou are surprised to see the large mapszine ubsonigin company. t eh the pood new aving won a) Receive 3t.75 milion per year for the next 20 years. Have $3.5milion today and receive $1,450,000 for each of themext 20 years. Your financisl adviser tells you that it is reasonable to expect to eam 12 percent on investments Required: 1 Calculace the preca value of each option. Fubure lu f31 Precent Value ef $1, Future Value Annuty of51, Procent Value Annuty of S1(Use appropriate factoris) froms the tables providad. Emter your anewers in dollars, not in millions. Opion A Opion B Opion C 2 Determine which option you prefe O Option C O OptionA O Option

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Option A 1.75 million per year till 20 Year Working PVAF PVAF 12% 20 Years 7.469444 1 0.892857143 2 0.797193878 Present Value of Option A         13.07 3 0.711780248 (1.75*7.469444) 4 0.635518078 5 0.567426856 Option B 11.75 Million Today 6 0.506631121 7 0.452349215 Present Value of Option B 11.75 8 0.403883228 9 0.360610025 Option C 10 0.321973237 PV 12% Present Value 11 0.287476104 Today 0.5 Million 1                     0.50 12 0.256675093 1-20 Year 1.45 Million 7.469444                   10.83 13 0.22917419 Present Value of Option C                   11.33 14 0.204619813 15 0.182696261 Since Option A have higher PV, should go with A 16 0.163121662 17 0.145644341 18 0.13003959 19 0.116106777 20 0.103666765 7.469443624 PVAF

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