Calculate present value of each of the alternatives

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Reference no: EM132044436

1. Calculate the present value of each of the alternatives below, if the discount rate is 12%.

a. $45,000 today in one lump sum.

b. $70,000 paid to you in seven equal payments of $10,000 each at the end of each of the next seven years.

c. $80,000 paid in one lump sum 7 years from now.

2. You are negotiating for the terms of a legal settlement, and your opponent’s attorney has presented you with the following alternative settlement alternatives:

a. $38,000 today in one lump sum.

b. $50,000 to be paid to you in five equal payments of $10,000 at the end of each of the next five years.

c. If your discount rate is 10%, what is the present value of each of the alternatives and which alternative would you choose, and why?

Reference no: EM132044436

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