Sally Hamilton has performed well as the chief financial officer of the Maxtech Computer Company and has earned a bonus. She has a choice among the following three bonus plans: 1. A $50,000 cash bonus paid now. 2. A $10,000 annual cash bonus to be paid each year over the next six years, with the first $10,000 paid now. 3. A three-year $22,000 annual cash bonus with the first payment due three years from now. Required: Evaluate the three alternative bonus plans. Sally can earn a 6% annual return on her investments.
Sally Hamilton has performed well as the chief financial officer of the Maxtech Computer Company and has earned a bonus. She has a choice among the following three bonus plans: 1. A $50,000 cash bonus paid now. 2. A $10,000 annual cash bonus to be paid each year over the next six years, with the first $10,000 paid now. 3. A three-year $22,000 annual cash bonus with the first payment due three years from now. Required: Evaluate the three alternative bonus plans. Sally can earn a 6% annual return on her investments.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sally Hamilton has performed well as the chief financial officer of the Maxtech Computer Company and has earned a bonus. She has a choice among the following three bonus plans: 1. A $50,000 cash bonus paid now. 2. A $10,000 annual cash bonus to be paid each year over the next six years, with the first $10,000 paid now. 3. A three-year $22,000 annual cash bonus with the first payment due three years from now. Required: Evaluate the three alternative bonus plans. Sally can earn a 6% annual
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