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In Million $130(a) a) Current lump sum Lump sum after 5 years PV factor for 10% for 5 years Present value $200 0.620921 $124 (6) Conclusion: Current lump sum of $130 is better b) Current lump-sum Tax @ 35% Present value of net cash inflow In Million $100 $35 $65 (a) Lump sum after 5 years Tax @ 40% Net cash inflow PV factor for 10% for 5 years Present value $200 $80 $120 0.620921 $75 (6) Conclusion: Lump sum in 5th year is better

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