Julie has just retired. Her company’s retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $127,000 immediately as her full retirement benefit. Under the second option, she would receive $14,000 each year for 10 years plus a lump-sum payment of $53,000 at the end of the 10-year period.
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Required:
1-a. Calculate the present value for the following assuming that the money can be invested at 11%.
1-b. If she can invest money at 11%, which option would you recommend that she accept?
Option 1: Total Present Value: $127,000
Option 2: Annual Annuity: $82,446= 14,000(5.889) Exhibit 13B_2
Lump Sum Payment: $18,656= 53,000(0.352) Exhibit 13B_1
Total Present Value: $101,102= 82,446+ 18,656
Julie has just retired. Her company’s retirement program has two options as to how retirement benefits...
Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $141,000 immediately as her full retirement benefit. Under the second option, she would receive $20,000 each year for 8 years plus a lump-sum payment of $60,000 at the end of the 8-year period. Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables....
Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $141,000 immediately as her full retirement benefit. Under the second option, she would receive $20,000 each year for 8 years plus a lump-sum payment of $60,000 at the end of the 8-year period. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables....
Julie has just retired Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $136,000 immediately as her full retirement benefit. Under the second option, she would receive $25,000 each year for five years plus a lump-sum payment of $55,000 at the end of the five-year period Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables...
Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $130,000 immediately as her full retirement benefit. Under the second option, she would receive $19,000 each year for 5 years plus a lump-sum payment of $75,000 at the end of the 5-year period. Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factors) using tables....
Annual cash inflows from two competing investment opportunities are given below. Each investment opportunity will require the same initial investment. Year 1 Year 2 Year 3 Year 4 Investment X Investment y $ 3,000 $ 6,000 4,000 5,000 5,000 4.000 6,000 3,000 Total $ 18,000 $18,000 Click here to view Exhibit 11B-1, to determine the appropriate discount factor(s) using tables. Required: Compute the present value of the cash inflows for each investment using a 10% discount rate. (Round discount factor(s)...
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Linda's husband has just passed away and she is entitled to $100,000 insurance benefit. She chooses to receive the benefit annually over 15 payments, with the first payment immediately. Suppose the interest rate that her benefit gets is 4%, but the insurance company can actually invest the money at 5%. How much is the insurance company making (in terms of present value) by paying out the benefit in installments instead of in a lump sum?
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