Answer:
Option A is the more convinient.
Explanation:
Giving the following information:
She wants you to choose which one of the following sets of cash flows you would like to receive:Option A: Receive a one-time gift of $ 10,000 today. Option B: Receive a $1500 gift each year for the next 10 years. The first $1500 would be received 1 year from today. Option C: Receive a one-time gift of $18,000 10 years from today.
We will assume a discount rate of 10%.
Option A:
Present value= $10,000
Option B:
Final value= {A*[(1+i)^n-1]}/i
A= annual deposit
FV= {1500*[(1.10^10)-1]/0.10= 23,906.14
PV= FV/(1+i)^n
PV= 23,906.14/1.10^10= $9,216.85
Option C:
PV= 18,000/1.10^10= $6,939.80