Which alternative is worth more in present value terms

Assignment Help Financial Management
Reference no: EM131819237

One of your relatives has died and states you as a beneficiary in his will.

You must choose between a trust fund that pays you $10,000 per month (starting in 60 months) for 20 years or a single amount of $1,000,000 in one year.

Your investment account earns 4% APR (compounded monthly).

Which alternative is worth more in present value terms and by how much?

Reference no: EM131819237

Questions Cloud

How much would the bond price change : If interest rates surprisingly increase by 0.5 percent, by how much would the bond’s price change?
What is a bank reconciliation : List some examples of timing differences, and for each difference, determine if it would affect the book side of the reconciliation or the bank side.
What does the cash ratio help determine : Why is it necessary to record journal entries after the bank reconciliation has been prepared? Which side of the bank reconciliation requires journal entries?
What is the minimum amount of equity : What is the minimum amount of equity that? he'll have to put up in this? transaction?
Which alternative is worth more in present value terms : Which alternative is worth more in present value terms and by how much?
Defining internal control in brief : Defining internal control Internal controls are designed to safeguard assets, encourage employees to follow company policies, promote operational efficiency.
Major corporations are franchised as public corporations : The majority of major corporations are franchised as public corporations. Discuss the key strength and weakness of the public corporation.”
After exhaustive negotiations : You are considering leasing a car. After exhaustive negotiations, Should you lease or purchase the car, if you plan to keep the car forever?
Discuss about the gender critique : Discuss the gender critique put forth my second wave feminist artists. How and why did they use visual art to critique issues of gender?

Reviews

Write a Review

Financial Management Questions & Answers

  Equipment is depreciated straight-line to zero book value

Thornley Machines is considering a 3-year project with an initial cost of $660,000. The project will not directly produce any sales but will reduce operating costs by $400,000 a year. The equipment is depreciated straight-line to a zero book value ov..

  Target capital structure-what is the aftertax cost of debt

Bargeron Corporation has a target capital structure of 63 percent common stock, 8 percent preferred stock, and 29 percent debt. Its cost of equity is 12.8 percent, the cost of preferred stock is 5.8 percent, and the pretax cost of debt is 7.5 percent..

  Derive the probability distribution of the one year hpr

Derive the probability distribution of the one-year HPR on a 30-year U.S. Treasury bond with an 8% coupon if it is currently selling at par and the rob ability distribution of its yield to maturity a year from now.

  Zero coupon bond with face value

A zero coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If stated interest rates are 2% annually (with quarterly compounding) how much would you pay today for a zero coupon bond w..

  According to the efficient market hypothesis

According to the efficient market hypothesis (EMH)

  Taxes reported on the income statement

The Fitness Studio, Inc.’s, 2012 income statement lists the following income and expenses: EBIT = $533,000, interest expense = $66,000, and net income = $439,000. Calculate the 2012 taxes reported on the income statement.

  How does an installment note differ from a bond payable

How does an installment note differ from a bond payable?

  The firm has total debt with a book value

A firm has current assets that could be sold for their book value of $38 million. The book value of its fixed assets is $76 million, but they could be sold for $106 million today. The firm has total debt with a book value of $56 million, but interest..

  Estimated that equipment will have aftertax residual value

Suppose it is estimated that equipment will have aftertax residual value of $400,000 at end of lease. What is maximum lease payment acceptable to wildcart?

  About introducing a new surface cleaning machine

Applied Nanotech is thinking about introducing a new surface cleaning machine. The marketing department has come up with the estimate that Applied Nanotech can sell 15 units per year at $300,000 net cash flow per unit for the next five years. If unsu..

  What is the herfindahl-hirschman index for east city

What is the Herfindahl-Hirschman Index for East City?

  You need to raise in order to build your shipping terminal

Suppose your firm needs to raise $10.5 million to construct a new shipping terminal. As CFO, you plan to raise funds in the following manner: 60% of the funds will be raised by selling long term debt (bonds). 40% of the funds will be raised by retain..

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