Your grandfather has offered you a choice of one of the three following alternatives: $12,000 now; $6,000 a year for six years; or $76,000 at the end of six years. Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.
a-1. Assuming you could earn 10 percent annually, compute the present value of each alternative: (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
$12,000:
$6,000:
$76,000:
a-2. Which alternative should you choose?
$76,000 received at end of six years
$6,000 received each year for six years
$12,000 received now
b-1. If you could earn 11 percent annually, compute the present value of each alternative: (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
$12,000:
$6,000:
$76,000
b-2. Which alternative should you choose?
$76,000 received at end of six years
$6,000 received each year for six years
$12,000 received now