Review problem of tv production

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Reference no: EM131928068

Question: Working as a grip in a TV production remake of The Little Rascals; you suffered a workplace accident, which has left you unable to work for the next five years. Your employer's insurer has offered you a choice of accepting either of two 5-year cash flow streams or lump sum amounts. You may accept settlement A or settlement B either as a cash flow stream or as a lump sum. Given the cash flow stream and lump-sum amounts associated with each, and assuming that you can earn an 8% rate of return, which alternative (A or B) and in which form (cash flow stream or lump-sum amount) would you prefer?

	Cash flow stream
End of Year	Alternative A	Alternative B
1	$45,000	$70,700
2	45,000	58,000
3	45,000	45,000
4	45,000	32,150
5	45,000	19,300
	Lump-sum amount
Now	$181,600	$180,000

Reference no: EM131928068

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