After completing a long and successful career as senior vice president for a lar

Question

After completing a long and successful career as senior vice president for a large bank, you are preparing for retirement. After visiting the human resources office, you have found that you have several retirement options to choose from:

You believe you can earn 8 percent on your investments and your remaining life expectancy is 6 years.     


Required:
1. Calculate the net present value of each option. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Enter your answers in dollars but not in millions. Round the final answer to nearest whole dollar.)

           

2. Determine which option you prefer.

Explanation / Answer

1) Calculate net present value :

a) First option = 1150000

b) Second option = (65000*4.62288) = 300487

c) Third option = (55000*2.57710+75000*2.04578) = 295174

2) Option A

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