In exchange for a $20,000 payment today, a well-known company will allow you to choose one of the alternatives shown in the following table. Your opportunity cost is 11%.
Alternative Single amount
A ....... $28,500 at end of 3 years
B........ $54,000 at end of 9 years
C ....... $160,000 at end of 20 years
a. Find the value today of each alternative.
b. Are all the alternatives acceptable—that is, worth $20,000 today?
c. Which alternative, if any, will you take?