Answer:
The present value Option 1 = $100,000
The present value Option 2 =$97.368,57
Explanation:
The formula to calculate Present Values is equal to:
Present Value = FV / (1+r) ∧n
Let´s calculate Present Value for Option 2:
PV1 = $20,000 / (1+0,10) ∧ 1= $18,181.82
PV2 = $20,000 / (1+0,10) ∧ 2= $16,528.92
PV3 = $20,000 / (1+0,10) ∧ 3= $15,026.29
PV4 = $20,000 / (1+0,10) ∧ 4= $13,660.26
PV5 = $20,000 / (1+0,10) ∧ 5= $12,418.42
PV6 = $20,000 / (1+0,10) ∧ 6= $11,289.47
PV7 = $20,000 / (1+0,10) ∧ 7= $10,263.16
PV1 + PV2 +PV3 +PV4 + PV5 + PV6 + PV7 = $97.368,57
