4.6 You have won the Florida state lottery. Lottery officials offer you the choice of the following...

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4.6 You have won the Florida state lottery. Lottery officials offer you the choice of the following alternative payouts:

Alternative 1: $10,000 one year from now.

Alternative 2: $20,000 five years from now.

Which alternative should you choose if the discount rate is:

a. 0 percent?

b. 10 percent?

c. 20 percent?

d. What discount rate makes the two alternatives equally attractive to you?

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Corporate Finance

ISBN: 9780071229036

6th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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