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Your grandfather has offered you a choice of one of the three following alternatives: $7,000 now; $2,000 a year for eight years; or $32,000 at
Your grandfather has offered you a choice of one of the three following alternatives: $7,000 now; $2,000 a year for eight years; or $32,000 at the end of eight years. Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. |
b-1. | If you could earn 10 percent annually, compute the present value of each alternative: (Do not round intermediate calculations. Round your final answers to 2 decimal places.) |
Present Value | |
$7,000 | $ |
$2,000 | $ |
$32,000 | $ |
b-2. | Which alternative should you choose? | ||||||
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