You are considering two insurance settlement offers The first offer includes

You are considering two insurance settlement offers

This preview shows page 86 - 93 out of 125 pages.

67. You are considering two insurance settlement offers. The first offer includes annual payments of $5,000, $7,500, and $10,000 over the next three years, respectively. The other offer is the payment of one lump sum amount today. You are trying to decide which offer to accept given the fact that your discount rate is 5%. What is the minimum amount that you will accept today if you are to select the lump sum offer? A. $19,877.67B.$20,203.00C. $21,213.15D. $23,387.50E. $24,556.88 Present value = $4,761.90 + $6,802.72 + $8,638.38 = $20,203.00 Difficulty level: Easy Topic: UNEVEN CASH FLOWS AND PRESENT VALUE Type: PROBLEMS 4-86
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Chapter 04 - Discounted Cash Flow Valuation 68. You are considering a job offer. The job offers an annual salary of $52,000, $55,000, and $60,000 a year for the next three years, respectively. The offer also includes a starting bonus of $2,000 payable immediately. What is this offer worth to you today at a discount rate of 6%? Present value = $2,000 + $49,056.60 + $48,949.80 + $50,377.16 = $150,383.56 Difficulty level: Easy Topic: UNEVEN CASH FLOWS AND PRESENT VALUE Type: PROBLEMS 4-87
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Chapter 04 - Discounted Cash Flow Valuation 69. You are considering a project with the following cash flows:What is the present value of these cash flows, given a 9% discount rate? Present value = $1,100.92 + $1,515.02 + $2,239.33 = $4,855.27 Difficulty level: Easy Topic: UNEVEN CASH FLOWS AND PRESENT VALUE Type: PROBLEMS 4-88
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Chapter 04 - Discounted Cash Flow Valuation 70. You are considering a project with the following cash flows:What is the present value of these cash flows, given an 11% discount rate? Present value = $5,045.05 + $7,304.60 + $1,462.38 = $13,812.03 Difficulty level: Easy Topic: UNEVEN CASH FLOWS AND PRESENT VALUE Type: PROBLEMS 4-89
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Chapter 04 - Discounted Cash Flow Valuation 71. You are considering a project with the following cash flows:What is the present value of these cash flows, given a 3% discount rate? A.$13,732.41B. $13,812.03C. $14,308.08D. $14,941.76E. $14,987.69 Present value = $4,077.67 + $4,712.98 + $4,941.76 = $13,732.41 Difficulty level: Easy Topic: UNEVEN CASH FLOWS AND PRESENT VALUE Type: PROBLEMS 4-90
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Chapter 04 - Discounted Cash Flow Valuation 72. You have some property for sale and have received two offers. The first offer is for $189,000 today in cash. The second offer is the payment of $100,000 today and an additional $100,000 two years from today. If the applicable discount rate is 8.75%, which offer should you accept and why? Present value = $100,000 + $84,555.42 = $184,555.42 You should accept the $189,000 today since it is the higher net present value. Difficulty level: Medium Topic: UNEVEN CASH FLOWS AND PRESENT VALUE Type: PROBLEMS 4-91
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Chapter 04 - Discounted Cash Flow Valuation
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