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After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, wel-known magazine subscription companyIt has arrived
After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, wel-known magazine subscription companyIt has arrived with the good news that you are the big winner, having won $27 million. You have three options (a) Receive $1.35 million per year for the next 20 years (b) Have $9.75 million today. (c) Have $3.75 million today and receive $1,050,000 for each of the next 20 years. Your financial adviser tells you that it is reasonable to expect to eam 13 percent on investments. Required: 1. Calculate the present value of each option. (Future Value of $1, Present Value of $1, Future Value Annuity of S1, Present Value Annuity of $1) (Use appropriate factor(s) from the tables provided. Enter your answers in dollars, not in millions.) Present Value Option B Option C 2. Determine which option you prefer. Option B O Option A O Option
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