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Personal Finance Problem P5-31 Value of a single amount versus a mixed stream Boris Miller has contracted to sell a piece of land that he owns, which has permission for a residential development. A property developer is willing to buy the land and has proposed two methods of pay. ment. The developer is willing to pay 150,000 now or a deferred payment over the next 4 years paying 40,000 at the end of year 1, 30,000 at the end of year 2. 250.000 at the end of year 3, and 60,000 at the end of year 4. Boris wants to use the proceeds at the end of year 5 to start a business and is concerned about future value of his receipts at the end of year 5. He can earn 4% annual interest from his investment account. Which alternative should Boris choose? LGO PS-34 Value of a mixed stream Neil Tyson has developed a prototype of an armored fabric that is very light, but is capable of stopping projectiles as efficiently as a tra tronal hullet-proof jacket. A military supplier is considering the technology and to offered to pay Neil 30,000 in years 1, 2, and 3; and 40,000 in years 4 to 6. Al payments will be made at the end of each year. a Lay out the cash flows involved in the offer on a timeline. b. If Neil applies a required rate of return of 10% to them, what is the present 2 of this series of payments? c. Another company has made an offer of a one-time payment of 275,000 for the fabric. Which offer should Neil accept

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