A friend of Mr. Richards recently won a law suit for $30 million. They have the ability to either take the payments over 10 years or settle today for cash of $25 million today. Mr. Richard is optimistic that he can earn a 6% return on the money and that they should settle for $25 million today and he will invest it for them.
a. You'll will need to demonstrate the present value of the $30 million today versus the future value of the $25 million in 5 years to make your argument.
b. Briefly describe which settlement is maximizing the value for the client and explain why?