Question
1. you have just won a $20,000 lottery jackpot. You can collect the money in payments of $1,000 each year for 20 years or receive
1. you have just won a $20,000 lottery jackpot. You can collect the money in payments of $1,000 each year for 20 years or receive a lump sum payment of $12,000 today. Assuming a 6% discount rate which will you choose?
2. When Sidney was born her grandmother deposited $750 in a saving account earning a modest 4% interest annually. Not to be outdone, Sara's father deposited $1500 on each of her birthdays for 19 years in a separate bank account that pays 5% interest annually. When Sidney turns 19, how much money will she have altogether in both saving accounts?
3. Shoes Horn, Inc. wants to purchase a shoe-making machine that will help generate annual profits for the company. In the first year, the profit will be $10,000. In the second year, $8000. In the third year $4000. After the third year, the machine will be useless and can only be thrown away. what is the maximum purchases price Shoe Horns should pay for the shoe-making machine iif it wants to earn at least a 15% rate of return on the investment?
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