Present Value and Future Value of Money
Question
As a winning team of Dragon Boat Race Competition in WA, your team was given to choose one of the following prizes:
a. $100,000 now.
b. $180,000 at the end of five years.
c. $11,400 a year forever.
d. $19,000 for each of 10 years.
e. $6,500 next year and increasing thereafter by 5 per cent a year forever
Your team was dazzled by these options, and the other team members turned to you for your help as you are studying finance courses in a university. If the interest rate is 12 per cent, how are you going to help your team to make the choice? (Please state detailed calculations, reasons, and the logic leading to your choice).
Summary
The question belongs to Finance and it discusses about present value and future value of money.
Total Word Count 87