Uncle Roscoe, a wealthy relative, has given you a choice of receiving $10,000 today or $3,000 at the end of each year for the next four years.Which table factor(s) should be used to most eﬃciently determine the "value" of the $3,000 cash-ﬂow stream?

Question

Quizplus · Accepted Answer

The present value of a $1 annuity factor should be used to determine the value of the cash-flow stream. This is because the question is asking for the present value of a series of cash flows that occur over time (four years), which is exactly what the present value of an annuity factor calculates. The future value of $1 and the present value of $1 factors would not be as useful in this situation.

Uncle Roscoe, a Wealthy Relative, Has Given You a Choice