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) ;
(b) ;
(c) plus the annuity has a smaller present value than . She should take the cash settlemen
B) (a) ;
(b) ;
(c) plus the annuity has a larger present value than . She should take plus the annuity.
C) (a) ;
(b) ;
(c) plus the annuity has a larger present value than . She should take plus the annuity.
D) (a) ;
(b) ;
(c) plus the annuity has a smaller present value than . She should take the cash settlemen
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