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December 21, 2014

Homework Help: Finance - Accounting

Posted by Momof8 on Thursday, July 23, 2009 at 8:22am.

Can somebody people check this out and let me know if I did it right? Your uncle offers you a choice of $30,000 in 50 years or $95 today. If money is discounted at 12 percent, which should you choose? You should take the $95.
Option #1: Using appendix b
PV =FV [1/ (1+i) ^n]
PV=FV [1/ (1+i) ^50] (n= 50, i=12%)
PV=$30,000[1/.003]
PV=$30,000 x .003= $90

Option #2
PV= $95
I came to this conclusion by using appendix b. So I would take the $95 now over the $30,000 in 50 years because in today money the $30,000 would only be worth $90 in the future. And who knows, in 50 years I may not be alive to enjoy the money.

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