Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $137,000 immediately as her full retirement benefit. Under the second option, she would receive $26,000 each year for seven years plus a lump-sum payment of $56,000 at the end of the seven-year period. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. Required: 1a. Calculate the present value for the following assuming that the money can be invested at 14%. Present Value of First Option Lump-sum payment Present Value of Second Option Total present value 1b. If you can invest money at a 14% return, which option would you prefer? First option Second option
Julie has just retired. Her company's retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $137,000 immediately as her full retirement benefit. Under the second option, she would receive $26,000 each year for seven years plus a lump-sum payment of $56,000 at the end of the seven-year period. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. Required: 1a. Calculate the present value for the following assuming that the money can be invested at 14%. Present Value of First Option Lump-sum payment Present Value of Second Option Total present value 1b. If you can invest money at a 14% return, which option would you prefer? First option Second option
Chapter3: Income Sources
Section: Chapter Questions
Problem 51P
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Transcribed Image Text:Julie has just retired. Her company's retirement program has two options as to how retirement benefits can
be received. Under the first option, Julie would receive a lump sum of $137,000 immediately as her full
retirement benefit. Under the second option, she would receive $26,000 each year for seven years plus a
lump-sum payment of $56,000 at the end of the seven-year period.
Use Excel or a financial calculator to solve. Round answers to the nearest dollar.
Required:
1a. Calculate the present value for the following assuming that the money can be invested at 14%.
Present Value
of First Option
Lump-sum payment
Present Value
of Second
Option
Total present value
1b. If you can invest money at a 14% return, which option would you prefer?
First option
Second option
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