Question
A man recently won the McDonalds poor faculty benefit lottery for $600,000. The man has the option of receiving a lump-sum check for $340,000 or
A man recently won the McDonalds poor faculty benefit lottery for $600,000. The man has the option of receiving a lump-sum check for $340,000 or leaving the money in the McDonalds poor faculty benefit fund and receiving an annual year-end check for $60,000 for each of the next 10 years. The man likes to (and can) earn at least 11% return (the available interest rate) on his investments.
For your information the following present value factors at 11%
Present Value Present Value of
End of Period of $1 an Annuity of $1
10 0.35218 5.88923
a. What is the present value amount of the lump sum :
b. Please show your calculations and identify the present value of the annuity to be considered:
c. Which choice financially (the lump sum or the annuity) should (poor) Mr. Stack select and state why this is the best choice?
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