Matthew is considering several possible compensation alternatives for services he has provided as a consultant: Option A: Matthew could receive $8,000 today. Option B: Matthew could receive $2,500 at the end of each of the next four years. Option C: Matthew could receive $12,000 five years from now. Required: Calculate the present value for each option assuming that Matthew can earn 7 percent on any investment funds. Which option results in the greatest financial benefit to Matthew? If Matthew earns 10 percent, will that change your answer to # 2 above? Please explain.

Matthew is considering several possible compensation alternatives for services he has provided as a consultant: Option A: Matthew could receive $8,000 today. Option B: Matthew could receive $2,500 at the end of each of the next four years. Option C: Matthew could receive $12,000 five years from now. Required: Calculate the present value for each option assuming that Matthew can earn 7 percent on any investment funds. Which option results in the greatest financial benefit to Matthew? If Matthew earns 10 percent, will that change your answer to # 2 above? Please explain.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 19P

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