question Amanda got hired as a financial analyst. Her boss gave her 5 bonus cont

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Amanda got hired as a financial analyst. Her boss gave her 5 bonus contract options (different contracts) to choose from. Amanda cares about the PV of her cash inflows. The opportunity cost is 8 percentage. Bonus is paid at the end of a year. Contract # Year 1 Year 2 Year 3 50, 000 75, 000 100, 000 50, 000 100, 000 75, 000 100, 000 75, 000 50, 000 100, 000 50, 000 75000 75, 000 50, 000 100, 000 Which contract will give her the highest PV? Contract 2 Contract 4 Contract 1 Contract 3 0 Contract 5

Explanation / Answer

D. Contract 3

Working:

   Present value Contract 1 $         189,980 contract 2 $         191,568 Contract3 $         196,585 Contract 4 $         189,980 Contract 5 $         191,568 Contract 3 has more Present value among other contracts.

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