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 $137,000 immediately as her full retirement benefit. Under the second option, she would receive $26,000 each year for seven years plus a lump-sum payment of $56,000 at the end of the seven-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 14%. Present Value of First Option Lump-sum payment Present Value of Second Option Total present value 1b. If you can invest money at a 14% return, which option would you prefer? First option Second option

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 $137,000 immediately as her full
retirement benefit. Under the second option, she would receive $26,000 each year for seven years plus a
lump-sum payment of $56,000 at the end of the seven-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 14%.
Present Value
of First Option
Lump-sum payment
Present Value
of Second
Option
Total present value
1b. If you can invest money at a 14% return, which option would you prefer?
First option
Second option
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 $137,000 immediately as her full retirement benefit. Under the second option, she would receive $26,000 each year for seven years plus a lump-sum payment of $56,000 at the end of the seven-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 14%. Present Value of First Option Lump-sum payment Present Value of Second Option Total present value 1b. If you can invest money at a 14% return, which option would you prefer? First option Second option
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