Question
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
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
$28,492
now, or the buyer will make a series of payments starting now and continuing at annual intervals shown in the following table,
Mixed Stream | |
Beginning of year | Cash Flow |
0 | $8,000 |
1 | $6,000 |
2 | $10,000 |
3 | $3,000 |
4 | $9,000 |
. Because Gina doesn't really need the money today, she plans to let it accumulate in an account that earns
9%
annual interest. Given her desire to buy a house five years after selling the lot, she decides to choose the payment
alternative either
the lump sum or the mixed
stream that
provides the higher future value at the end of 5 years. Which alternative will she choose?
The future value,
FV Subscript nFVn,
of the lump sum deposit is
$.
(Round to the nearest cent.)The future value of the mixed stream of payments is
$
(Round to the nearest cent.)
Which alternative will Gina choose?(Select the best answer below.)
1.Mixed Stream of Payments
2.Lump sum deposit
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