Holooly Plus Logo
Holooly Plus Logo

Question 6.T-Y-S.J: Your rich uncle has offered you two living trust payouts for...

Your rich uncle has offered you two living trust payouts for the rest of your life. The positive cash flows of each trust are shown below. If your personal MARR is 10 \% per year, which trust should you select? (6.5)

End of Year Trust A Trust B
0 $0 $0
1–10 $1,000 $1,200
11–∞ $1,500 $1,300

Note: At 10 \% per year interest, infinity occurs when N=80 years.

The Blue Check Mark means that this solution has been answered and checked by an expert. This guarantees that the final answer is accurate.
Learn more on how we answer questions.

Compare the annual worth of the two infinite series:

\begin{aligned}&\mathrm{AW}_{\mathrm{A}}(10 \%)=\$ 1,000+[\$ 500 / 0.10](P / F, 10 \%, 10)(A / P, 10 \%, \infty)=\$ 1,192.75 \\&\mathrm{AW}_{\mathrm{B}}(10 \%)=\$ 1,200+[\$ 100 / 0.10](P / F, 10 \%, 10)(A / P, 10 \%, \infty)=\$ 1,238.55\end{aligned}

Select Trust B.

Related Answered Questions

Ned and Larry’s Ice Cream Company Ned and Larry’s Ice Cream Company produces specialty ice cream and frozen yogurt in pint-sized containers. The latest annual performance report praised the firm for its progressive policies but noted that environmental issues like packaging disposal were a concern.

Verified Answer:
Assuming that Ned and Larry's is able to sell all ...

A certain U.S. government savings bond can be purchased for $7,500. This bond will be worth $10,000 when it matures in 5 years. As an alternative, a 60-month certificate of deposit (CD) can be purchased for $7,500 from a local bank, and the CD yields 6.25% per year. Which is the better investment i

Verified Answer:
Bond: F W=\$ 10,000 with certainty ...

Automobile repair shops typically remind customers to change their oil and oil filter every 3,000 miles. Let’s call this Strategy 1. Usually you can save money by following another legitimate guideline—your automobile user’s manual. It suggests changing your oil every 5,000–7,000 miles.We’ll call t

Verified Answer:
15,000 / 5,000=3 oil changes [latex...

You have been requested to offer a recommendation of one of the mutually exclusive industrial sanitation control systems that follow. If the MARR is 15% per year, which system would you select? Use the IRR method. (6.5)

Verified Answer:
Rank order: Gravity-fed (G), Vacuum-led (V) The IR...

Two proposals have been offered for streamlining the business operations of a customer call center. Proposal A has an investment cost of $30,000, an expected life of 5 years, property taxes of $450 per year, and no market value. Annual expenses are estimated to be $6,000. Proposal B has an investme

Verified Answer:
Assume repeatability. \begin{aligned}&A...

Refer to Problem 6-H. Which thickness would you recommend if the study period was 4 years? Use the imputed market value technique to estimate the market value of the 5 cm alternative after 4 years. (6.5)

Verified Answer:
C R_{5 \mathrm{~cm}}(15 \%)=\$ 40,000(A / P...

Two insulation thickness alternatives have been proposed for a process steam line subject to severe weather conditions. One alternative must be selected. Estimated savings in heat loss and installation cost are given below. Which thickness would you recommend for a MARR = 15% per year and negligibl

Verified Answer:
\operatorname{AW}_{2 \mathrm{~cm}}(15 \%)=-...

The local police department is considering two types of sidearms for its officers. The Glock 40 costs $400 apiece and has a life of 5 years. The other option is a Sauer 45 that costs $800 and has a 10-year life. The Sauer pistol has a residual value of $200 at the end of its 10-year service life.

Verified Answer:
The cash flows for the difference between the two ...

An industrial coal-fired boiler for process steam is equipped with a 10-year-old electrostatic precipitator (ESP). Changes in coal quality have caused stack emissions to be in noncompliance with federal standards for particulates. Two mutually exclusive alternatives have been proposed to rectify th

Verified Answer:
Examine \Delta (New Baghouse - New ...

Four mutually exclusive projects are being considered for a new two-mile jogging track. The life of the track is expected to be 80 years, and the sponsoring agency’s MARR is 12% per year. Annual benefits to the public have been estimated by an advisory committee and are shown below. Use the IRR met

Verified Answer:
List the alternatives in increasing order of initi...