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34) Managerial Financial Accounting Assignments AE9-7 Solution

34) Managerial Financial Accounting Assignments AE9-7 Solution

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AE9-7 Calculate Present Value [LO 2] Juanita Martinez is ready to retire and has a choice of three pension plans. Plan A provides for an immediate cash payment of $225,000. Plan B provides for the payment of $22,500 per year for 10 years and the payment of $225,000 at the end of year 10. Plan C will pay $45,000 per year for 10 years. Juanita Martinez desires a return of 10 percent.
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Determine the present value of each plan. (Round present value factor calculations to 4
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Unformatted text preview: decimal places, e.g. 0.2525. Round all other calculations and final answer to 0 decimal places, e.g. 5,250.) Present Value Plan A $ 225,000 Plan B $ 131,307.75 Plan C $ 525,231. Plan A Total $225,00 Plan B Cash Flow Present Value Factor Total $22,500 6.1446 $138,25 4 225,000 0.3855 86,738 $224,99 2 Plan C Select the best plan. Plan B Click here if you would like to Show Work for this question AE9-7 Plan A should be selected as it has the highest present value....
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