Shawna Is Considering One of Two Options

question 84

Multiple Choice

Shawna is considering one of two options. The first option is to receive $1,800 per month for the first 5 years and $2,000 per month for the last 5 years based on an interest rate of 6.5% compounded monthly. The second option is to receive $145,000 now. Determine which option should be chosen to maximize benefits now.

• A) First option, as it provides benefit of $165,915.26 compared to $145,000 for second
• B) First option, as it provides benefit of $155,915.16 compared to $145,000 for second
• C) First option, as it provides benefit of $152,915.16 compared to $145,000 for second
• D) First option, as it provides benefit of $150,915.16 compared to $145,000 for second
• E) First option, as it provides benefit of $145,915.16 compared to $145,000 for second

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Definitions:

Fiscal Year

A one-year period used by governments and businesses for accounting purposes, which may not coincide with the calendar year.

Property Tax

A levy on property that the owner is required to pay, usually levied by local governments based on the property's assessed value.

Prepaid Property Tax

An expense that has been paid in advance for property taxes, classified as a current asset on the balance sheet until the period the tax covers has passed.

Financial Statements

Reports that summarize the financial performance, position, and cash flows of a business, including the balance sheet, income statement, and cash flow statement.