Answer:
a) Annual Worth of net gain is $6793.0184
b) Annual Worth of net gain is $6395.557
c) Annual Worth of net gain is $6922.65
Recommendation: Option C is the best option for Alice
Explanation:
a) Alice will get $200 per month for 5 years which means for 60 months at the rate of 18% compounded monthly.
So FV of that cash flow
= FV(18%/12,60,-200)
= 19242.9303
A lump sum amount of $17000 at the end of 5th year
Total Worth = 19242.9303 + 17000
= $36242.9303
Annual worth = $36242.9303 / 3.1271
= $11589.94
Net Gain = $36242 - $15000
= $21242.9303
Annual Worth of net gain = $21242.9303 / 3.1271
= $6793.0184
b) Racehorse share will be worth $35000 on 5 years.
Annual Worth = $35000 / 3.1271
= $11192.48
Net Gain = $35000 - $15000
= $20000
Annual Worth of net gain = $20000 / 3.1271
= $6395.557
c) Saving account will generate funds after 5 years
= FV(18%/12,60,,-15000)
= $36648.30
Net Gain = $36648.30 - $15000
= $21648.30
Annual Worth = $36348.30 / 3.1271
= $11719.58
Annual Worth of net gain = $21648.30 / 3.1271
= $6922.65
Therefore, Option c is best for Alice.
