Which has a greater present value, a future value of $300,000 received in year 6, or an end-of-the-year annuity (first cash flow exactly one year from today) of $75,000 that lasts for four years if the relevant interest rate is 0%?
A) The future value of $300,000 is preferred.
B) The annuity has a greater present value.
C) You are indifferent to these two sets of cash flows on a present value basis.
D) You can't properly answer this question because the interest rate is 0%.
C
Explanation: C) Because the interest rate is 0%, the present values are equal.
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