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2. King is receiving a settlement in a lawsuit. The other party offers him a choice of two payment plans: Plan 1: Annual payments
2. King is receiving a settlement in a lawsuit. The other party offers him a choice of two payment plans: Plan 1: Annual payments of $108 000 for 6 A single cash payment of $450 000 to be received immediately years Plan 2: Assume that money can be invested at 8.9% per year compounded ??. a) Which payment plan should King accept? Explain your reasoning. b) Would your answer change if money could be invested at 11.9% per year? Explain.
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A D E F G H 1 Question a 2 Cash Flow Present Value of Cash Flow 3 6 10800000 10800000 10800000 10800000 10800000 10800000 9917355 9106846 8362577 7679134 7051546 6475249 B210089B1 C210089C1 D210089D1 E210089E1 F210089F1 G210089G1 48592707 SUMB3G3 4 5 Sum of Present Value of Cash Flow 6 Accept Yearly payment as the present value of yearly payments is more than single cash payment of 450000 7 8 Question b 9 Cash Flow 1 3 4 10800000 10800000 10800000 10800000 10800000 10800000 10 ...
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Fundamental Accounting Principles
Authors: John Wild, Ken Shaw, Barbara Chiappetta
22nd edition
9781259566905, 978-0-07-76328, 77862279, 1259566900, 0-07-763289-3, 978-0077862275
