Your grandfather would like to share some of his fortune with you. He offers to give you money under one of the following scenarios (you get to choose) (Click the icon to view the scenarios) (Click the icon to view Present Value of $1 table) (Click the icon to view Present Value of Ordinary Annuity of $1 table) (Click the icon to view Future Value of $1 table) (Click the icon to view Future Value Ordinary of Annuity of 51 table) 1. $8,750 per year at the end of each of the next six years 2. $49,650 (lump sum) now 3. $100,450 (lump sum) six years from now Requirement 1. Calculate the present value of each scenario using a 6% discount rate. Which scenario yields the highest present value? Round to the nearest dollar Begin by calculating the present value of each scenano using a 0% discount rate. (Round the amounts to the nearest dollar) Present value of Scenario 1 = Present value of Scenario 2 - Present value of Scenario 3 appears to be the best option. Based on a 6% discount rate its present value is the Requirement 2. Would your preference change if you used a 12% discount rate? Begin by calculating the present value of each scenario using a 12% discount rate (Round the amounts to the nearest dollar) Present value of Scenario 1 Present value of Scenario 2 = Present value of Scenario 3 = Using a 12% discount rate change the preference in this problem Present Value of $1 Periods 1% 2% 3% 4% 5% 6% 7% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 Period 2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 Period 3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 Period 4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 Period 5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.666 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 Period 9 0.914 0.837 0.766 0.703 0.6450.592 0.544 Period 10 0 905 0.820 0.744 0.676 0.614 0.558 0.500 8% 9% 10% 12% 14% 15% 16% 18% 20% 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0 847 0.833 0.857 0.842 0.826 0.797 0.769 0.756 0.743 0.718 0.694 0.7940.772 0.751 0.712 0.675 0.658 0.641 0.609 0.579 0.735 0.708 0.683 0.636 0.592 0.572 0.552 0.516 0.482 0.681 0.650 0.621 0,567 0.519 0.497 0.476 0.437 0402 0.630 0.596 0.564 0.507 0.456 0.432 0.410 0.3700335 05830.547 0.513 0.452 0.400 0.376 0.354 0.3140.279 0.540 0.502 0.467 0,404 0.351 0.327 0.305 0.266 0.233 0.500 0.460 0.424 0.361 0.308 0.284 0.263 0.225 0.194 0.463 0.422 0.3860.322 0.270 0.247 0.227 0.1910.162 Period 11 0.896 0.8040.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.287 0.237 0.215 0.195 0.162 0.135 Period 12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.257 0.208 0.187 0.168 0.137 0.112 Period 13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.229 0.182 0.163 0.145 0.116 0.093 Period 14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.205 0.160 0.141 0.125 0.099 0.078 Period 15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.183 0.140 0.123 0.108 0.084 0.065 Period 16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0218 0.163 0.123 0.107 0.093 0.071 0.054 Period 17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.1980.1460108 0.093 0.080 0.060 0.045 Period 18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.1800.130 0.095 0.081 0.069 0.051 0.038 Period 19 0.828 0.686 0.570 0.475 0.396 0.331 0:277 0.232 0.194 0.164 0.116 0.083 0.070 | 0.060 0.043 0.031 Period 20 0.820 0.673 0.554 0.456 0377 0.312 0.258 0215 0 178 0.149 0.104 0.073 0.061 0.051 0.037 0.026 Period 21 0.811 0.660 0.538 0.439 0.359 0.294 0.242 0.199 0.1640.135 0.093 0.064 0.053 0.044 0.031 0.022 Period 22 0.803 0 647 0.522 0.422 0.342 0.278 0.226 0.194 0.150 0.123 0.083 0.056 0.046 0.038 0.026 0.018 Present Value of Ordinary Annuity of $1 Periods 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20% Period 1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.870 0.862 0.847 0.833 Period 2 1.970 1.942 1.913 1.886 1.859 1.833 1808 1.783 1759 1736 1.6901.647 1.626 1.605 1.566 1.528 Period 3 2.9412.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.402 2322 2.283 2.246 2.174 2.106 Period 4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2 914 2855 2.798 2.690 2589 Period 5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.605 3.433 3.3523274 3.127 2.991 Period 6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4 623 4.4864.355 4.111 3.889 3.784 3.685 3.498 3.328 Period 7 6.728 6.472 6.230 6.0025.786 5.582 5.389 5.206 5,033 4.868 4.564 4.288 4.160 4.039 3.812 3.605 Period 8 7.652 7.3257.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 4.968 4.639 4.487 4.344 4.078 3.837 Period 9 8.5668.1627.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.32849464.772 4.6074.303 4.031 Period 10 9.4718.983 8.530 8.111 7.722 7.360 7.0246.710 6 418 6.145 5.6505.216 5.019 4.833 4.494 4.192 Period 11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7 139 6.805 6.495 5.938 5.453 5.234 5.029 4.656 4.327 Period 12 11 255 10.575 9.954 9.385 8,863 8.384 7943 7 5367.1616.814 6.194 5.660 5.421 5.1974.793 4.439 Period 13 12.134 11 348 10.635 9.986 9.394 8.853 8.358 7 904 7.487 7.103 6.424 5.842 5.583 5.342 4.910 4.533 Period 14 13.004 12 106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367 6.628 6.002 5.724 5.468 5.008 4.611 Period 15 13.865 12 849 11.938 11 118 10.380 9.712 9.108 8.559 8.061 7.606 6.811 6.142 5.847 5.575 5.092 4.675 Period 16 14 718 13,578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7 824 6.974 6.265 5.954 5.689 5.162 4.730 Period 17 15.562 14.292 13.166 12.166 11.274 10.477 9,763 9.122 8.5448.0227.120 6.373 6.047 5.749 5222 4.775 Period 18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9 372 8.756 8.2017.250 6.4676.128 5.818 5.273 4.812 Period 19 17 226 15.678 14.324 13 134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6.550 6.198 5.877 5.316 4.844 Period 20 18.046 16.351 14 877 13.590 12.462 11.470 10.5949.818 9.129 8.514 7 4696 623 6 259 5929 5.353 4.870 Period 21 18.857 17 011 15.415 14.029 12 821 11764 10 836 10.017 9 292 8 649 7 562 6.687 6 312 5.9735,384 4 891 Period 22 19.660 17.658 15.937 14 451 13.163 12.042 11.061 10.2019.442 8.7727 645 6.743 6.359 6011 5.410 4 909 Future Value of $1 7% Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 1% 2% 3% 4% 5% 6% 8% 9% 10% 12% 14% 15% 1.010 1.020 1.030 1.040 1.050 1.060 1.070 1.080 1.090 1.100 1.120 1.140 1.150 1.020 1.040 1.061 1.0821.103 1.1241.145 1.166 1.1881.210 1.254 1.300 1.323 1.030 1.061 1.093 1.125 1.158 1.191 1.225 1.260 1.295 1.331 1.405 1.482 1.521 1.041 1.0821.126 1.170 1.216 1.2621.311 1.360 1.412 1.464 1.574 1.689 1.749 1.051 1.104 1.159 1.217 1.276 1.338 1.403 1.469 1.539 1.611 1.762 1.925 2.011 1.062 1.126 | 1.194 1.265 1.340 1.419 1.501 1.587 1.677 1.772 1.9742.195 2.313 1.072 1.149 1.230 1.316 1.407 1.504 1.606 1.714 1.828 1.949 2.211 2.502 2.660 1.083 1.1721.267 1.369 1.4771.594 1.718 1.851 1.993 2.144 2.476 2.853 3.059 1.094 1.195 1.305 1.423 1.551 1.689 1.838 1.999 2.172 2.3582.773 3.252 3.518 1.105 | 1.219 1.344 1.480 1.629 1.791 1.967 2.159 2.367 2.594 3.106 3.707 4.046 1.116 1.243 1.384 1.539 1.7101.898 2.105 2.332 2.580 2.853 3.479 4.2264.652 1.127 | 1.268 1.426 1.601 | 1.796 2012 2.252 2.518 2.813 3.138 3.896 4.818 5.350 1.138 1.294 1.469 1.665 1.886 2.133 2.410 2720 3.066 3.452 4.363 5.492 6.153 1.149 1.319 1.513 1.732 1.980 2.261 2.579 2.937 3.342 3.798 4.887 6.261 7.076 1.161 1.346 1.558 1.801 2.079 2.3972.759 3.172 3.642 4.177 5.4747.138 8.137 Period 11 Period 12 Period 13 Period 14 Period 15 Period 16 Period 17 Period 18 Period 19 Period 20 1.1731.373 1.605 1.873 2.183 2.540 2.952 3.426 3.970 4.5956.130 8.1379.358 1.184 1.400 1.653 1.948 2.292 2.6933.159 3.700 4.3285.0546.8669.276 10.76 1. 196 1.428 1.702 2.026 2.407 2.854 3.380 3.996 4.717 5.560 7.690 10.58 12.38 1.208 1.457 1.754 2.107 2.527 3.026 3.617 4.316 5.142 6.116 8.613 12.06 14.23 1.220 1.486 1.806 2.191 2.653 3.2073.870 4.661 5.604 6.727 9.646 13.74 16.37 1.232 1.516 1.860 2.279 2.786 3.400 4.141 5.034 6.109 7.400 10.80 15.67 18.82 1.245 1.546 1.916 2.370 2.925 3.604 4.430 5.437 6.659 8.140 12.10 17.86 21.64 Period 21 Period 22 1% 8% Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Future Value of Ordinary Annuity of $1 2% 3% 4% 5% 6% 7% 9% 10% 12% 14% 15% 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 2.010 2.020 2030 2040 2050 2.060 2070 2.080 2.090 2.100 2.120 2.140 2.150 3.030 3.0603.091 3.122 3.153 3.1843.215 3.246 3.278 3.310 3.374 3.440 3.473 4.060 4.122 4.1844.246 4.310 4.375 4.440 4.506 4.573 4.641 4.779 4.921 4.993 5.101 5.204 5.309 5.416 5.526 5.637 5.751 5.8675.985 6.105 6.353 6.610 6.742 6.152 6.308 6.468 6.633 6.802 6.975 7.153 7.3367.523 7.716 8.115 8.536 8.754 7.214 7.4347.6627.898 8.142 8.3948.654 8.923 9.200 9.487 10.09 10.73 11.07 8.286 8.5838.892 9.214 9.549 9.897 10.260 10.64 11.03 11.44 12.30 13.23 13.73 9.369 9.755 10.16 10.58 11.03 11.49 11.98 12.49 13.02 13.58 14.78 16.09 16.79 10.46 10.95 11.46 12.01 12.58 13.18 13.82 14.49 15.19 15.94 17.55 19.34 20.30 11.57 12.17 12.81 13.49 14.21 14.97 15.78 16.65 17.56 18.53 20.65 23.04 24.35 12.68 13.41 14.19 15.03 15.92 16.87 17.89 18.98 20.14 21.3824.13 27 27 29.00 13.81 14.68 15.62 16.63 17.71 18.88 20.14 21.50 22.95 24.52 28.03 32.09 34.35 14.95 15.97 17.09 18.29 19.60 21.02 22.55 24.21 26.02 27.98 32.39 37.58 40.50 16.10 17.29 18.60 20.02 21.58 23.28 25 13 27 15 29.36 31.77 37.28 43.84 47.58 17.26 18.64 20.16 21.82 23.66 25.67 27.89 30.32 33.00 35.95 42.75 50.98 55.72 18.43 20.01 21.76 23.70 25.84 28.2130.84 33.75 36.97 40.54 48.88 59.12 65.08 19.61 21.4123.41 25.65 28.13 30.91 34,00 37.45 41.30 45.60 55.75 68.39 75.84 20.81 22.84 25.12 27.67 30.54 33.76 37 38 41.45 46.02 51.16 63.44 78.97 88.21 22.02 24.30 26.87 29.78 33.07 36.79 41.00 45.76 51.16 57.28 72.05 91.02 102.4 23 24 25.7828.68 31.97 35.72 39.9944.87 50.42 56.76 64.00 81.70 104.8 118.8 24 47 27 30 30 54 34 25 38 51 43.39 49.01 55.46 | 62.87 71.40 92.50 120.4 137.6 Period 11 Period 12 Period 13 Period 14 Period 15 Period 16 Period 17 Period 18 Period 19 Period 20 Period 21 Period 22