your parents have made you two offers. the first offer includes annual gifts of 5000, 6000,...

your parents have made you two offers. the first offer includes annual gifts of 5000, 6000, and 8000 at the end of each of the next three years, respectively. the other offer is the payment of one lump sum amount today. you are trying to decide which offer to accept given the fact that your discount rate is 6.2%. what is the minimum amount that you will accept today if you are to select the lump sum offer?

Expert Solution

Ans $ 16707.06

Year	Project Cash Flows (i)	DF@ 6.2%	DF@ 6.2% (ii)	PV of Project ( (i) * (ii) )

1	5000	1/((1+6.2%)^1)	0.941620	4,708.10
2	6000	1/((1+6.2%)^2)	0.886647	5,319.88
3	8000	1/((1+6.2%)^3)	0.834885	6,679.08
		PV	16,707.06

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