Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $158,000 immediately as her ful retirement benefit. Under the second option, she would receive $21,000 each year for five years plus a lump- sum payment of $66,000 at the end of the five-year period. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. Required: 1a. Calculate the present value for the following assuming that the money can be invested at 12%.
Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $158,000 immediately as her ful retirement benefit. Under the second option, she would receive $21,000 each year for five years plus a lump- sum payment of $66,000 at the end of the five-year period. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. Required: 1a. Calculate the present value for the following assuming that the money can be invested at 12%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![Julie has just retired. Her company’s retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $158,000 immediately as her full retirement benefit. Under the second option, she would receive $21,000 each year for five years plus a lump-sum payment of $66,000 at the end of the five-year period.
Use Excel or a financial calculator to solve. Round answers to the nearest dollar.
**Required:**
1a. Calculate the present value for the following assuming that the money can be invested at 12%.
| | Present Value of First Option |
|--------------------------------------------|-------------------------------|
| Lump-sum payment | $158,000 |
| Present Value of Second Option | |
| Total present value | $134,629 |
1b. If you can invest money at a 12% return, which option would you prefer?
- [x] First option
- [ ] Second option
### Note:
The table provided compares the two retirement options. The first option offers an immediate lump-sum payment of $158,000. The present value of the second option, which includes annual payments of $21,000 for five years and an additional lump sum at the end, is calculated to be $134,629 when discounted at a 12% investment rate.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F984c8e7b-e2ca-406f-9243-2fa3333ca1eb%2F14027ecb-f35e-4c56-903c-f9274a1495e5%2Fkcxtuy_processed.png&w=3840&q=75)
Transcribed Image Text:Julie has just retired. Her company’s retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $158,000 immediately as her full retirement benefit. Under the second option, she would receive $21,000 each year for five years plus a lump-sum payment of $66,000 at the end of the five-year period.
Use Excel or a financial calculator to solve. Round answers to the nearest dollar.
**Required:**
1a. Calculate the present value for the following assuming that the money can be invested at 12%.
| | Present Value of First Option |
|--------------------------------------------|-------------------------------|
| Lump-sum payment | $158,000 |
| Present Value of Second Option | |
| Total present value | $134,629 |
1b. If you can invest money at a 12% return, which option would you prefer?
- [x] First option
- [ ] Second option
### Note:
The table provided compares the two retirement options. The first option offers an immediate lump-sum payment of $158,000. The present value of the second option, which includes annual payments of $21,000 for five years and an additional lump sum at the end, is calculated to be $134,629 when discounted at a 12% investment rate.
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