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Comment My Add-ins - Object Screenshot Box Drop Cap Online Video Media Cross-reference D Page Number Header & Footer Text rations Add-ins Links Comments Your friend has given you a choice.... You have 2 options in receiving your gift from them (1.) Take $100,000 per year for the next 20 years. or (2.) Take the Cash Option. The cash option consists of taking the Present Value (PV) of 2,000,000 received in 20 years with a discount rate of 6%. You know that cash today is worth more than cash tomorrow because you learned the time value of money in V186. You believe that you can invest and get a better return than your friend's discount rate or that you can enjoy the benefits of winning now instead of later You decide to take the Cash Option (2) so determine how much your friend will pive you with the cash option You remember from V186 the discounting formula in the Mikesell textbook. It is PV=FV0/(1+1) How much money will you receive by taking the cash option? 3. To what present value would $20,000 received in five years, assuming an annual discount rate of 5967
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