A pension fund pays out $50,000 a year in perpetuity, based on a cost of capital of 5%, to retiring employees. Alternatively, the employee can take out a lump sum of $1 million payable immediately. The employee should choose

a the lump sum, because it is available now.

b the lump sum, because its future value is $25 million.

c the pension fund, because its present value is $1.25 million.

d the pension fund, because it offers steady payments in perpetuity.

eneither option gives the same present value.