ou have been offered 5 options to choose from as a gift for being the best innovative student in a national competition . The options are as shown below and you can only select ONE:* • Option A: Receive Kshs.500,000 at the end of each of the next 8 years. • Option B: Receive a one-time payment of Kshs.10,000,000 at the end of 3 years from today • Option C: Receive a perpetual amount of Sh. 300,000 annually. • Option D: Receive Kshs. 1,000,000 two years from today at the end of every year for 8 years. • Option E : Receive Kshs 200,000 at the end of year 1, Kshs 250,000 at the end of year 2, Kshs.300,000 at the end of year 3 and Kshs. 500,000 at the end of year 4. Required: Assuming that your required rate of return is 6%, which option is the most valuable?
You have been offered 5 options to choose from as a gift for being the best innovative student in a
national competition . The options are as shown below and you can only select ONE:*
• Option A: Receive Kshs.500,000 at the end of each of the next 8 years.
• Option B: Receive a one-time payment of Kshs.10,000,000 at the end of 3 years from
today
• Option C: Receive a perpetual amount of Sh. 300,000 annually.
• Option D: Receive Kshs. 1,000,000 two years from today at the end of every year for 8
years.
• Option E : Receive Kshs 200,000 at the end of year 1, Kshs 250,000 at the end of year 2,
Kshs.300,000 at the end of year 3 and Kshs. 500,000 at the end of year 4.
Required:
Assuming that your required rate of return is 6%, which option is the most valuable?
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