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 $27 million. You have three options. (a) Receive $1.35 million per year for the next 20 years. (b) Have $9.75 million today. Have $3.75 million today and receive $1,050,000 for each of the next 20 (c) years. Your financial adviser tells you that it is reasonable to expect to earn 13 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 Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar. Enter your answers in dollars, not in millions.) Present Value Option A Option B Option C 2. Determine which option you prefer. O Option A O Option B O Option C
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 $27 million. You have three options. (a) Receive $1.35 million per year for the next 20 years. (b) Have $9.75 million today. Have $3.75 million today and receive $1,050,000 for each of the next 20 (c) years. Your financial adviser tells you that it is reasonable to expect to earn 13 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 Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar. Enter your answers in dollars, not in millions.) Present Value Option A Option B Option C 2. Determine which option you prefer. O Option A O Option B O Option C
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 $27 million. You have three options.
| (a) | Receive $1.35 million per year for the next 20 years. |
| (b) | Have $9.75 million today. |
| (c) | Have $3.75 million today and receive $1,050,000 for each of the next 20 years. |
Your financial adviser tells you that it is reasonable to expect to earn 13 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 Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar. Enter your answers in dollars, not in millions.)
Transcribed Image Text: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 $27 million. You have three options.
(a) Receive $1.35 million per year for the next 20 years.
(b) Have $9.75 million today.
Have $3.75 million today and receive $1,050,000 for each of the next 20
(c)
years.
Your financial adviser tells you that it is reasonable to expect to earn 13 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 Value
Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar. Enter your
answers in dollars, not in millions.)
Present Value
Option A
Option B
Option C
2. Determine which option you prefer.
O Option A
O Option B
O Option C
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