Utilizing time value of money

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Reference no: EM131075703

Arthur is to receive an inheritance of $40,000 from a great-aunt. She is offering him the choice of taking $40,000 today OR an annuity of $5,000 a year for 25 years. He also had a number of investment alternatives available, the lowest of which offered a 12% annual compounded return. Arthur liked the annuity, but was willing to invest in it only if it offered a 12% return or better. Required: 1. In a narrative format in Word, please address the following with Arthur:

a. Utilizing time value of money calculations as in the previous problems, please determine what Arthur should do. That is, should he take the $40.000 today or should he take the $5,000 a year for 25 years?

Reference no: EM131075703

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