Option is best from the insurers perspective

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Reference no: EM13929995

A delivery driver for appliance Warehouse (AW) struck and killed a pedestrian in a crosswalk. The widow of the man killed has threatened to sue AW for wrongful death. AW's liability insurer would like to settle the case out-of-court to minimize legal defense costs and authorized AW to offer three settlement options:

Option 1: Five annual payments of $175,000, with the first payment in one year

Option 2: Four payments of $225,000, with the payments two years, four years, six years, eight years from today

Option 3: A payment of $300,000 today and $550,000 four years from today

Assume a 6% discount rate, which settlement option is best from the insurer's perspective?

Reference no: EM13929995

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