Ruth Nail receives two offers for her seaside home. The first offer is for $1 million today. The second offer is for an owner-financed sale with a payment schedule as follows:
|
End of year
|
Payment
|
|
0(Today)
|
$200,000
|
|
1
|
200,000
|
|
2
|
200,000
|
|
3
|
200,000
|
|
4
|
200,000
|
|
5
|
300,000
|
Assuming no differential tax treatment between the two options and that Ruth earns a return of 8 percent on her investments, which offer should she take?