Question 2 (25 marks)
(a) Your uncle is due for retirement and plans to start his own
agribusiness. The company he works for has offered him a lump sum
retirement payment of $60,000 or a life time annuity of $7000
whichever he chooses. Your uncle is in reasonably good health and
expects to live for at least 15 years. Which option should he
choose, assuming that an 8% interest rate is appropriate to
evaluate the annuity?
Question 2 25 Marks A Your Uncle Is Due For Retirement And Plans To Start His Own Agribusiness The Company He Works 1 (26.45 KiB) Viewed 56 times
Question 2 (25 marks) (a) Your uncle is due for retirement and plans to start his own agribusiness. The company he works for has offered him a lump sum retirement payment of $60,000 or a life time annuity of $7000- whichever he chooses. Your uncle is in reasonably good health and expects to live for at least 15 years. Which option should he choose, assuming that an 8% interest rate is appropriate to evaluate the annuity? (b) (i) What is depreciation? (ii) What is a sinking fund? (iii) What does it mean when a firm's durable input is living off depreciation?
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