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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 $38 million. You have three options (a) Receive $1.9 million per year for the next 20 years (b) Have $12.5 million today (o) Have $2.5 million today and receive $1,600,000 for each of the next 20 vears Your financial adviser tells you that it is reasonable to expect to earn 12 percent on investments Required: 1. Calculate the present value of each option. (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. Enter your answers in dollars, not in millions.) Present Value Option A Option B Option C 2. Determine which option you prefer. O Option C O Option A O Option B
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