EichelbergerTruckingwonasettlementinalawsuitandwasofferedfourdifferentpaymentalternativesbythedefendantsinsurancecompany.Theinterestrateis8%.Ignoringthetaxconsiderations,whichofthefollowingfouralternativeshasthehighestpresentvalue(andthusisthebestoption)?Supportyouranswerwiththeappropriatecalculations.

• 1. $180,000 now.
• 2.$70,000peryearforthenext4years(end-of-yearpayments)

3.$15,000 now and then $33,000 per year for the next 10 years (end-of-year payments). Hint: Calculate the present value of the initial $15,000 separately. Then calculate the present value the $33,000 annuity separately. Finally, add the two present value amounts together to get the overall present value.

4.$17,000 per year for the next 10 years (end-of-year payments) plus a lump sum payment of $245,000 at the end of the 11^th year. Hint: Calculate the present value of the $17,000 10-year annuity separately. Then calculate the present value the $245,000 payment received at the end of year 11 separately. Finally, add the two present value amounts together to get the overall present value.