P5–29 Value of a single amount versus a mixed stream Gina Vitale has just contracted to sell a small parcel of land that she inherited a few years ago. The buyer is willing to pay $24,000 at the closing of the transaction or will pay the amounts shown in the following table at the beginning of each of the next 5 years. Because Gina doesn’t really need the money today, she plans to let it accumulate in an account that earns 7% annual interest. Given her desire to buy a house at the end of 5 years after closing on the sale of the lot, she decides to choose the payment alternative—$24,000 single amount or the mixed stream of payments in the following table—that provides the higher future value at the end of 5 years. Which alternative will she choose?

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Mixed stream Beginning of year 1 2 Cash flow $ 2,000 3 4,000 6,000 4 8,000 5 10,000