Assignments: ACCT102 #46 Ch 11A Homework
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value:
4.00 points
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Julie has just retired. Her company's retirement program has two options as to how retirement benefits can
be received. Under the first option, Julie would receive a lump sum of $157,000 immediately as her full
retirement benefit. Under the second option she wor would receive $20,000 each year for six years plus a
lump-sum payment of $65,000 at the end of the six-year period
Click here to view Exhibit 118-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using
tables.
Required:
1a. Calculate the present value for the following assuming that the money can be invested at 12% (Use
the appropriate table to determine the discount factor(s)).
Present Value of First Option
Cash Flow
Discount Factor=
Present Value
Lump-sum payment $
157,000
Present Value of Second Option
Cash Flow
\times Discount Factor=
Present Value
Annual annuity
$
20,000
\times 4.111 $
82.220
Lump-sum payment
$
65.000
\times 0.507 $
32.955
Total present value
$
115,175
