Proposal 1: Pay the family of Allison Boone $300,000 a year for the next 20 years, and $500,000 a year for the remaining 20 years. N=40 years.

Proposal 2 :Pay the family a lump‐sum payment of $5 million today. N=40 years.

Proposal 3: Pay the family of Allison Boone a relatively small amount of $50,000 a year for the next 40 years, but also guarantee them a final payment of $75 million at the end of 40 years.

In order to analyze the present value of these three proposals, Whitaker called on a financial expert to do the analysis. You will aid in the process.

1. Using a current long‐term interest rate, recommend a proposal to the Boone family. Justify your choice of discount rate.