Calculate the present value of payment option

Assignment Help Business Management
Reference no: EM131369323

You have a winning lottery ticket for $100,000. You never will get the full $100,000. The State offers you three options. The first pays you $80,000 up front for the entire amount. The second pays you the winnings over a three-year period. The last option pays you a large payment today with small payments in the future.

The payment options are detailed in the table below:

(a) Calculate the present value of each payment option, assuming the interest rate is 12%.

(b) Then, calculate the present values based on an interest rate of 5%.

(c) Compare your answers and explain why they are different when the interest rate changes.

Amount paid today

80000

22000

50000

Amount paid after 1 year

0

22000

12000

Amount paid after 2 years

0

22000

12000

Amount paid after 3 years

0

22000

12000

Please show work and type answer.

Reference no: EM131369323

Questions Cloud

Base year for the calculation of gdp : The economy produces only one good, FatBit. The economy produced 5,000 units of FatBit during Year 1 and 7,000 units of FatBit in Year 2. The price of each unit of FatBit in Year 1 was $100 and it was $200 in Year 2. Suppose Year 1 is taken as the..
Explain the differences and focus of mis systems : MBALN-736A Enterprise Information Systems - Explain the differences and focus of MIS systems and KMS systems. Research online, present a specific company that most benefits from each type of system, analyse how each company uses the system and expl..
How much should he set aside today for the purchase : The car will cost $54,626 at that time. Assume that Stephen can earn 5.89 percent (compounded monthly) on his money. How much should he set aside today for the purchase?
Vendor is proposing their new equipment : A vendor is proposing their new equipment which would allow you to assemble 2000 widgets per day. What would the new takt time be? Keep two decimal places in your answer.
Calculate the present value of payment option : (a) Calculate the present value of each payment option, assuming the interest rate is 12%. (b) Then, calculate the present values based on an interest rate of 5%. (c) Compare your answers and explain why they are different when the interest rate chan..
What is the present value of the cash flow pattern : You have been offered the opportunity to invest in a project that will pay $2,703 per year at the end of years. What is the present value of this cash flow pattern?
Find the median and the first and third quartiles : The following data are annualized returns on a group of 15 stocks.- Find the median, the first and third quartiles, and the 55th and 85th percentiles for these data.
Write stepwise command for each challenge : Write stepwise command for each challenge. Please describe each command line used. Type in the Output for each challenge
Product life cycle helps marketers understand market trend : The product life cycle helps marketers understand market trend patterns related to all of the following except. Southwest Airlines sends an e-mail to frequent-flier customers offering a special low price between selected cities if the plane ticket is..

Reviews

Write a Review

Business Management Questions & Answers

  Determine areas in the budget where cost cutting can be made

Determine areas in the budget where cost cutting can be made if needed? Identify and assess one major and one minor risk inherent to the project. Develop a contingency plan for each of these risks. Please submit your assignment.

  List the different entitieyou are working as a student

List the different entitieYou are working as a student assistant for an engineering firm and are paid by the hour. Every two weeks, you in turn in a time sheet to your supervisor, and three workdays later, your paycheck is direct deposited int..

  Explain the project charter usually will include assumptions

Explain The project charter usually will include assumptions about the risks the project will face.

  Effort to develop perspectives also provide supporting

Students must make an effort to develop perspectives also provide supporting analyses, also incorporate some OB (Organizational Behavior) concepts in the analyses.

  Shwo the leadership issues

Distinguishing good leaders, motivation, leadership issues and Leadership will be defined as an attempt to use influence to motivate individuals to accomplish some goals.

  How to maximize the manufacturer profit

Determine how to maximize the manufacturer's profit. If either of the products is not produced in the optimal solution, use SolverTable to see how much this product's unit profit must be before it will be produced, and then use SolverTable again t..

  Why business decision is good or not good for business

Discuss why the business decision is good or not good for business. Define the term "good" for the purpose of this situation.

  Different department and supervisor names

Write an application that stores at least five different department and supervisor names in a two-dimensional array. Allow the user to enter a department name (such as"Marketing") and display the corresponding supervisor's name.

  Definition of sustainability and informally

Provide and initial "off the cuff" definition of sustainability and informally assess your organization's level of social responsibility based upon this definition. If you are not currently associated with an organization.

  Retail chain to produce documents

You have been asked to audit a national retail chain. Select one access device and one instance of application software which could be used by the retail chain to produce documents. Create a memo which you could provide to your manager in which yo..

  Explain if bree signs her name followed by the word

Explain If Bree signs her name followed by the word agent on the check without identifying Cleo

  Structure and genetic properties of dna

What is the structure and genetic properties of DNA?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd