Question
After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, well-known magazine subscription company. It has
After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, well-known magazine subscription company. It has arrived with the good news that you are the big winner, having won $39 million. You have three options.
(a) | Receive $1.95 million per year for the next 20 years. |
(b) | Have $12.75 million today. |
(c) | Have $2.75 million today and receive $1,650,000 for each of the next 20 years. |
Your financial adviser tells you that it is reasonable to expect to earn 13 percent on investments.
Required:
1. Calculate the present value of each option (a,b,c). (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar. Enter your answers in dollars, not in millions.)
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