Tyson Trucking won a settlement in a lawsuit and was offered four different payment alternatives by the defendant's insurance company. The interest rate is 6%. Ignoring tax considerations, which of the following four alternatives has the highest present value? Support your answer with the appropriate calculations.
I $150,000 now
II $45,000 per year for the next 4 years payment made at the end of the year
$5,000 now and then $20,000 per year for the next 10 years payment made at the end of
III
the year
IV $5,000 now and then $5,000 per year for the next 10 years payment made at the end of the year plus a lump-sum payment of $200,000 at the end of the eleventh year

Question

Quizplus · Accepted Answer

The Answer of Tyson Trucking won a settlement in a lawsuit and was offered four different payment alternatives by the defendant's insurance company. The interest rate is 6%. Ignoring tax considerations, which of the following four alternatives has the highest present value? Support your answer with the appropriate calculations.
I $150,000 now
II $45,000 per year for the next 4 years payment made at the end of the year
$5,000 now and then $20,000 per year for the next 10 years payment made at the end of
III
the year
IV $5,000 now and then $5,000 per year for the next 10 years payment made at the end of the year plus a lump-sum payment of $200,000 at the end of the eleventh year

Tyson Trucking Won a Settlement in a Lawsuit and Was