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 $37 million. You have three options. (a)Receive $1.85 million per year for the next 20 years.(b)Have $12.25 million today.(c)Have $2.25 million today and receive $1,550,000 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 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.) Check my workE11-6 (Algo) Comparing Options Using Present Value Concepts [LO 11-S1]After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, well-known magazinesubscription company. It has arrived with the good news that you are the big winner, having won $37 million. You havethree options.(a) Receive $1.85 million per year for the next 20 years.(b) Have $12.25 million today.Have $2.25 million today and receive $1,550,000 for each of the next 20(c)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 Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answer to thenearest whole dollar. Enter your answers in dollars, not in millions.)Present ValueOption AOption BOption C

Definition: Present value: This is the amount of future value reduced or discounted at a rate of…

Answered: Check my work E11-6 (Algo) Comparing…

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 $37 million. You have three options.

(a)	Receive $1.85 million per year for the next 20 years.
(b)	Have $12.25 million today.
(c)	Have $2.25 million today and receive $1,550,000 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 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.)

Check my work
E11-6 (Algo) Comparing Options Using Present Value Concepts [LO 11-S1]
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 $37 million. You have
three options.
(a) Receive $1.85 million per year for the next 20 years.
(b) Have $12.25 million today.
Have $2.25 million today and receive $1,550,000 for each of the next 20
(c)
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 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

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