In payment for engineering services rendered, you have been offered the choice of (a) a lump sum payment of $8 000 to be paid five years from now, or (b) five yearly payments of $1 000 that begin one year from now and increase by $300 per year. Draw the cash-flow diagrams for parts (a) and (b). If i = 10 percent compounded annually, which option should you select?

What will be an ideal response?


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