Which alternative will she choose

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Reference no: EM131111481

Gina Vitale has just contracted to sell a small parcel of land that she inherited a few years ago. The buyer is willing to pay $24,000 at the closing of the transaction or will pay the amounts shown in the following table at the beginning of each of the next 5 years. Because Gina doesn't really need the money today, she plans to let it accumulate in an account that earns 7% annual interest. Given her desire to buy a house at the end of 5 years after closing on the sale of the lot, she decides to choose the payment alternative-$24,000 single amount or the mixed stream of payments in the following table-that provides the higher future value at the end of 5 years. Which alternative will she choose?

Mixed stream

Beginning of year Cash flow

1 .......... $ 2,000

2 .......... 4,000

3 .......... 6,000

4 .......... 8,000

5 .......... 10,000

Reference no: EM131111481

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