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Doug just received a settlement from a lawsuit that pays him $125,000 immediately, followed by amounts...

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Finance

Doug just received a settlement from a lawsuit that pays him$125,000 immediately, followed by amounts of $125,000 at the end ofeach year over the next 10 years with one exception – lawyer feesreduce the amount in Year 3 to $75,000. However, the lawsuit allowsDoug to receive the equivalent present value today. Using aninterest rate of 6.5%, which of the following comes closest to theequivalent present value?

a.

$1,200,000

b.

$ 857,145

c.

$ 898,604

d.

$ 666,666

e.

$ 982,211

Answer & Explanation Solved by verified expert
3.6 Ratings (498 Votes)
Solution The equivalent present value of the receipts from thesettlement    See Answer
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