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A contract offers $25 000 immediately and $50 000 in 5 years or $10 000 at...

A contract offers $25 000 immediately and $50 000 in 5 years or $10 000 at the end of each year for 10 years. If money is worth 6%, which offer is preferable?

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Answer #1
we have to compute the present value for each option -
Option - 1 PV = $ 25,000.00
Option - II
PV = $ 37,362.91
50000/(1+6%)^5
Option - III
Put in calculator
FV 0
PMT -10000
I 6%
N 10
Compute PV $73,600.87
Pv = $73,600.87
Since option III has the higher value. Therefore same should be preferred
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