Question

1. What is the present value of 9 equal payments of $21,500 to be made at the end of each year for the next 9 years? The annual interest rate is 10% EYot S1. PV. LS1. EVAots1, and PVA ot 51) (Use the a whole dollar.)

2.Global Stores is downsizing and must let some employees go. Employees volunteering to leave are being offered a severance package of $121,000 cash, another $132,000 to be paid in one year, and an annuity of $30,500 to be paid each year for six years with the first payment coming at the end of this year. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answer to nearest whole dollar.)

What is the present value of the total severance package, assuming an annual interest rate of 5%?

3.You have just won the state lottery and have two choices for collecting your winnings. You can collect $102,000 today or receive $20,100 at the end of each year for the next seven years. A financial analyst has told you that you can earn 9% on your investments.

3a. Calculate the present value of both the options (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your answers to nearest whole dollar.)   

3b. Which alternative should you select?

	Option 1
	Option 2

Answer 1

Dear student, only one question is allowed at a time. I am answering the first question

Since annuity tables are not provided, we are using formulas in order to calculate the present value of an annuity

Present value of annuity

= P x [1 – (1+r) ^ -n] / r

Where,

P = Periodic payment = 21,500

r = Rate per period = 10% or 0.10

n = Number of periods = 9

So, Present value of annuity

= $21,500 x [ 1 – (1.10^-9)] / 0.10

= $21,500 x [1 - 0.424097] / 0.10

= $21,500 x 5.7590

= $123,819