Answer: c. $100,250 lump sum seven years from now
Explanation:
a. Present value of $8,750 per year for seven years.
This is an annuity so;
Present value = Annuity * Present value interest factor of an annuity, 7 years, 6%
= 8,750 * 5.5824
= $48,846
b. Present value of $50,050 right now is still $50,050.
c. Present value of $100,250 lump sum seven years from now.
= 100,250 / ( 1 + 6%)⁷
= $66,671.9756
= $66,672
Scenario C has the highest present value.
