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 $30 million. You have three options: Receive $1.5 million per year for the next 20 years. Have $10.5 million today. Have $2.25 million today and receive $1,200,000 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: 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.) Determine which option you prefer.
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