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### Horngren'S Financial And Managerial Accounting

Book edition 6th
Author(s) Tracie L. Miller-Nobles, Brenda L. Mattison
Pages 992 pages
ISBN 9780134486833

# Your grandfather would like to share some of his fortune with you. He offers to giveyou money under one of the following scenarios (you get to choose):1. $8,750 per year at the end of each of the next six years2.$49,650 (lump sum) now3. $100,450 (lump sum) six years from nowC H A P T E R 1 2Requirements1. Calculate the present value of each scenario using a 6% discount rate. Which scenarioyields the highest present value? Round to the nearest dollar.2. Would your preference change if you used a 12% discount rate? Present value of scenario 1,2 and 3 are$54,336, $49650 and$63,108. Scenario 3 has highest yield among all scenarios.

See the step by step solution

## Step 1: Definition of present value

The current value calculated by using the specified formula for the amount invested by the investor in future date.

## Step 2: calculation of present value

1.Present value:

2.Present Value of this scenario is \$49,650

3.Present Value: