Problem:
John just received a settlement from a lawsuit that pays him $125,000 immediately, followed by amounts of $125,000 at the end of each year over the next 10 years with one exception - lawyer fees reduce the amount in Year 3 to $75,000.
Required:
Question: Using an interest rate of 6.5%, which of the following comes closest to the equivalent present value?
Note: Please show how to work it out.