John Roberts is 55 years old and has been asked to accept early retirement from his company. The company has offered John three alternative compensation packages to induce John to retire.1. $180,000 cash payment to be paid immediately2. A 20-year annuity of $16,000 beginning immediately3. A 10-year annuity of $50,000 beginning at age 65Required:Which alternative should John choose assuming that he is able to invest funds at a 7% rate?
John Roberts is 55 years old and has been asked to accept early retirement from his company. The company has offered John three alternative compensation packages to induce John to retire.1. $180,000 cash payment to be paid immediately2. A 20-year annuity of $16,000 beginning immediately3. A 10-year annuity of $50,000 beginning at age 65Required:Which alternative should John choose assuming that he is able to invest funds at a 7% rate?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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John Roberts is 55 years old and has been asked to accept early retirement from his company. The company has offered John three alternative compensation packages to induce John to retire.
1. $180,000 cash payment to be paid immediately
2. A 20-year annuity of $16,000 beginning immediately
3. A 10-year annuity of $50,000 beginning at age 65
Required:
Which alternative should John choose assuming that he is able to invest funds at a 7% rate?
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