Answer from: kailey96

The requirement is to calculate the present value of each option:

$ 11.26 million

$11.5 million

$ 12.52 million

Explanation:

The present value formula in excel is very useful in this case:

=-pv(rate,nper,pmt,fv)

rate is the 14% interest rate to be earned per year

nper is duration of the payment

pmt is the amount of payment expected per year

fv is the is the future worth of the payment which is unknown

Option 1:

=-pv(14%,20,1.7,0)=$ 11.26 million

Option 2:

The amount receivable today is the present value i.e $11.5 million

option 3:

=-pv(14%,20,1.4,0)=$9.27 million

total =amount received today+$ 9.27 million=$3.25 million+$ 9.27 millon=$ 12.52 million

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