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?

Question

What will be an ideal response?

Answer 1