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:

Payment of $56,000 per year for 5 years and then $76,000 per year for life (this option is intended to give you some protection against inflation).

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.)

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:

Explanation / Answer

Calculation of the Present Value Present Value = Cash Inflows- Cash Outflows Option A Present Value = $1,080,000 Option B Prsent Value = 66000/.08 $825,000 Option C 56000*3.99+76000*.680/.08 From the annuity table 224000+.680*950000. Present Value = $870,000

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