Eichelberger trucking won a settlement in a lawsuit and was

Assignment Help Accounting Basics

Reference no: EM13599783

Eichelberger Trucking won a settlement in a lawsuit and was offered four different payment alternatives by the defendant's insurance company. The interest rate is 6%. Ignoring the tax considerations, which of the following four alternatives has the highest present value (and thus is the best option)? Support your answer with the appropriate calculations.

1) $180,000 now.

2) $52,000 per year for the next 4 years (end-of-year payments)

3) $5,000 now and then $24,000 per year for the next 10 years (end-of-year payments). Hint: Calculate the present value of the initial $5,000 separately. Then calculate the present value the $24,000 annuity separately. Finally, add the two present value amounts together to get the overall present value.

4) $9,100 per year for the next 10 years (end-of-year payments) plus a lump sum payment of $200,000 at the end of the 11th year. Hint: Calculate the present value of the $9,100 10-year annuity separately. Then calculate the present value the $200,000 payment received at the end of year 11 separately. Finally, add the two present value amounts together to get the overall present value.

Reference no: EM13599783

Questions Cloud

Camey corporation purchased delivery equipment on january 1 : camey corporation purchased delivery equipment on january 1 at a cost of 300000. the equipment is expected to have a

Atlantic company produces a single product for the most : atlantic company produces a single product. for the most recent year the companys net operating income computed by the

For the current year paxman company incurred 175000 in : for the current year paxman company incurred 175000 in actural manufacturing overhead cost. the manufacturing overhead

In the direct labor variance matrix there are three : in the direct labor variance matrix there are three factors 1 actual hours actual rate 2 actual hours standard rate and

Eichelberger trucking won a settlement in a lawsuit and was : eichelberger trucking won a settlement in a lawsuit and was offered four different payment alternatives by the

The company incurred 30000 in direct labor cost during : the balance in white companys work in process inventory account wasw 15000 on august 1 and 18000 on august 31. the

The red white amp blue partnership was begun with : the red white amp blue partnership was begun with investments by the partners as follows red 129000 white 159000 and

Leon plans to save 300 per month at the end of each month : leon plans to save 300 per month at the end of each month for retirement. he has 27 years to save for retirement. at an

In a crecent period 13000 units were produced and there was : in a crecent period 13000 units were produced and there was a favorable labor efficiency variance of 23000. if 40000

User Account

All Pages