Question

**Bonus Versus Stock**

A. The company has offered you a $5,000 bonus, which you may receive today, or 100 shares of the company’s stock, which has a current stock price of $50 per share. Mathematically, what is the best choice? Why?

B. What are the advantages and disadvantages of each option?
**Be sure to support your answers**.

C. What would you ultimately choose to do? What is your
financial reasoning behind this choice? **Consider supporting
your answer with quantitative data**.

Answer #1

A. Considering time value of money, the bonus received today has more worth than stock converted to cash on a later date. Present value of a dollar is higher than the future value.

B. Advantages : The cash is immediate and is available for liquidity needs today.

Disadvantages: The benefits of stock price appreciation may not be realized if bonus is encashed.

C. Taking financial reasoning in to consideration I would choose to invest in stocks due to appreciation of value, higher returns and investment for future needs.

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