2.1 After numerous years as a senior executive in the professional wrestling business, Aunt Edna is planning to retire on December 31, 2020. Her company has offered her two retirement choices. The first is twenty end-of-the-year payments of R122 000 each starting on December 31, 2021 and the second is a lump sum of R2.25 million payable on January 1, 2020. Which one should she pick if her opportunity cost of the money is 6.60%. 2.2 If the labor costs, in then-current dollars, over a four-year period are R1000, R2500, R2000 and R1000. The real interest rates in each year are 3%, 3%, 4% and 5%. The inflation rates in each year are forecast to be 6%, 5%, 7% and 3%. Determine the Present worth of labor costs (year 00). Given Information: The labor costs over 4 years: 1500, 2500, 2000, and 1000 (5).
2.1 After numerous years as a senior executive in the professional wrestling business, Aunt Edna is planning to retire on December 31, 2020. Her company has offered her two retirement choices. The first is twenty end-of-the-year payments of R122 000 each starting on December 31, 2021 and the second is a lump sum of R2.25 million payable on January 1, 2020. Which one should she pick if her opportunity cost of the money is 6.60%. 2.2 If the labor costs, in then-current dollars, over a four-year period are R1000, R2500, R2000 and R1000. The real interest rates in each year are 3%, 3%, 4% and 5%. The inflation rates in each year are forecast to be 6%, 5%, 7% and 3%. Determine the Present worth of labor costs (year 00). Given Information: The labor costs over 4 years: 1500, 2500, 2000, and 1000 (5).
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 43P
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Transcribed Image Text:2.1 After numerous years as a senior executive in the professional wrestling business, Aunt
Edna is planning to retire on December 31, 2020. Her company has offered her two
retirement choices. The first is twenty end-of-the-year payments of R122 000 each
starting on December 31, 2021 and the second is a lump sum of R2.25 million payable
on January 1, 2020. Which one should she pick if her opportunity cost of the money is
6.60%.
2.2 If the labor costs, in then-current dollars, over a four-year period are R1000, R2500,
R2000 and R1000. The real interest rates in each year are 3%, 3%, 4% and 5%. The
inflation rates in each year are forecast to be 6%, 5%, 7% and 3%. Determine the
Present worth of labor costs (year 00).
Given Information: The labor costs over 4 years: 1500, 2500, 2000, and 1000 (5).
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