Please help me.Don't use any AI.It's strictly prohibited. After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, well-known magazine subscriptioncompany. It has arrived with the good news that you are the big winner, having won $31 million. You have three options:a. Receive $1.55 million per year for the next 20 years..b. Have $10.75 million today.c. Have $2.5 million today and receive $1,250,000 for each of the next 20 years.Your financial adviser tells you that it is reasonable to expect to earn 14 percent on investments.Required:1. Calculate the present value of each option. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present ValueAnnuity of $1.)2. Determine which option you prefer.Complete this question by entering your answers in the tabs below.Required 1 Required 2Calculate the present value of each option. (Future Value of $1,Present Value of $1, Future Value Annuity of $1,Present Value Annuity of $1.)Note: Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar. Enter youranswers in dollars, not in millions.Present ValueOption AOption BOption CShow less

Answered: After hearing a knock at your front…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, well-known magazine subscription company. It has arrived with the good news that you are the big winner, having won $35 million. You have three options: Receive $1.75 million per year for the next 20 years. Have $11.75 million today. Have $3.5 million today and receive $1,450,000 for each of the next 20 years. Your financial adviser tells you that it is reasonable to expect to earn 12 percent on investments. Calculate the present value of each option.
After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large,well-known magazine subscription company. It has arrived with the good news that you are the bigwinner, having won “$20 million.” You discover that you have three options: (1) you can receive$1 million per year for the next 20 years, (2) you can have $8 million today, or (3) you can have $2million today and receive $700,000 for each of the next 20 years. Your financial adviser tells youthat it is reasonable to expect to earn 10 percent on investments. Which option do you prefer? Whatfactors influence your decision?TIP: All three scenarios require you to determine today’s value of the various payment options.These are present value problems.
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The Clearinghouse Sweepstakes has just informed you that you have won $1 million. The amount is to be paid out at the rate of $56,000 a year for the next 20 years. With a discount rate of 13 percent, what is the present value of your winnings? Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

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