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A Woman Can Sell Her Computer Graphics Company for $900,000 $217,967.04\$ 217,967.04

Question 273

Multiple Choice

A woman can sell her computer graphics company for $900,000 cash or for $100,000 plus $65,000 at the end of each year for 4 years. (a) Find the present value of the annuity that is offered if money is worth 7% compounded
Annually. (b) If she takes the $900,000, spends $100,000 of it, and invests the rest in a 4-year annuity at 7%
Compounded annually, what size annuity payment will she receive at the end of each year? (c) Which is better,
Taking the $100,000 and the annuity or taking the cash settlement?


A) (a) $217,967.04\$ 217,967.04 ;
(b) $206,659.68\$ 206,659.68 ;
(c) $100,000\$ 100,000 plus the annuity has a smaller present value than $900,000\$ 900,000 . She should take the cash settlemen
B) (a) $330,253.10\$ 330,253.10 ;
(b) $295,228.12\$ 295,228.12 ;
(c) $100,000\$ 100,000 plus the annuity has a larger present value than $900,000\$ 900,000 . She should take $100,000\$ 100,000 plus the annuity.
C) (a) $297,227.79\$ 297,227.79 ;
(b) $265,705.31\$ 265,705.31 ;
(c) $100,000\$ 100,000 plus the annuity has a larger present value than $900,000\$ 900,000 . She should take $100,000\$ 100,000 plus the annuity.
D) (a) $220,168.73\$ 220,168.73 ;
(b) $236,182.49\$ 236,182.49 ;
(c) $100,000\$ 100,000 plus the annuity has a smaller present value than $900,000\$ 900,000 . She should take the cash settlemen

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