What is the present value of these cash returns

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Reference no: EM131820084

1. Mr. Bearer may choose to take a lump-sum payment of $25,292.8 now from his insurance policy or an annuity of $3,200 annually as long as he lives. How long must Mr. Bearer anticipate living for the annuity to be indifferent to the lump sum if interest rate is 8%?

a. 13 years

b. 15 years

c. 11 years

d. 9 years

2. The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years, and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year). At a 9% interest rate, what is the present value of these cash returns?

a. $3,725,664

b. $4,105,281

c. $3,516,793

d. $3,934,575

Reference no: EM131820084

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