1. Assuming an interest rate of 5%, determine the present value for the above options. Which option should Alex choose? 2. The Weimer Corn
1. Assuming an interest rate of 5%, determine the present value for the above options. Which option should Alex choose? 2. The Weimer Corn
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![xercises i
Submitted
30.25/40 Total points awarded
Exercise 5-10 (Algo) Future and present value (LO5-3, 5-7, 5-8]
Answer each of the following independent questions.
Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1) $60,000 cash immediately, (2)
$18,000 cash immediately and a six-period annuity of $7,500 beginning one year from today, or (3) a six-period annuity of $11,800
d
beginning one year from today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from
the tables provided.)
1. Assuming an interest rate of 5%, determine the present value for the above options. Which option should Alex choose?
2. The Weimer Corporation wants to accumulate a sum of money to repay certain debts due on December 31, 2030. Weimer will make
annual deposits of $105,000 into a special bank account at the end of each of 10 years beginning December 31, 2021. ASsuming that
the bank account pays 6% interest compounded annually, what will be the fund balance after the last payment is made on December
31, 2030?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Assuming an interest rate of 5%, determine the present value for the above options. Which option should Alex choose?
(Round your final answers to nearest whole dollar amount.)
Annuity
Payment
Immediate
Cash
PV Annuity
PV Option
Option 1
$
60,000
60,000
i.
Option 2
7,500
18,000
18.000
IS
Option 3
Which option should Alex
choose?
11,800
56,070
56,070
Option 1](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3e1bfd6a-3cb6-4031-858f-4ba8da8545b1%2Fb1966093-98a4-4b6c-ad7a-b63a2891acc3%2F29qhe8v_processed.jpeg&w=3840&q=75)
Transcribed Image Text:xercises i
Submitted
30.25/40 Total points awarded
Exercise 5-10 (Algo) Future and present value (LO5-3, 5-7, 5-8]
Answer each of the following independent questions.
Alex Meir recently won a lottery and has the option of receiving one of the following three prizes: (1) $60,000 cash immediately, (2)
$18,000 cash immediately and a six-period annuity of $7,500 beginning one year from today, or (3) a six-period annuity of $11,800
d
beginning one year from today. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from
the tables provided.)
1. Assuming an interest rate of 5%, determine the present value for the above options. Which option should Alex choose?
2. The Weimer Corporation wants to accumulate a sum of money to repay certain debts due on December 31, 2030. Weimer will make
annual deposits of $105,000 into a special bank account at the end of each of 10 years beginning December 31, 2021. ASsuming that
the bank account pays 6% interest compounded annually, what will be the fund balance after the last payment is made on December
31, 2030?
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Assuming an interest rate of 5%, determine the present value for the above options. Which option should Alex choose?
(Round your final answers to nearest whole dollar amount.)
Annuity
Payment
Immediate
Cash
PV Annuity
PV Option
Option 1
$
60,000
60,000
i.
Option 2
7,500
18,000
18.000
IS
Option 3
Which option should Alex
choose?
11,800
56,070
56,070
Option 1
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