A you will receive 31 annual payments of 175000 with the, Ask an Expert

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a. You will receive 31 annual payments of $175,000, with the first payment being delivered one year from today. The income will be taxed at a rate of 28 percent. Tax will be withheld when the checks are issued.

b. Beginning today, you will receive $125,000 each year for 30 years. The cash flow from this annuity will be taxed at 28 percent. You will also receive $530,000 at the end of year 30 which you will not have to pay tax on this amount.

Using a discount rate of 10 percent, which option should you select?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91265837

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