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Assume that a wealth maximizing lotto winner can receive $10,000,000 in a lump sum today or receive $900,000 per year for the next 25 years
Assume that a wealth maximizing lotto winner can receive $10,000,000 in a lump sum today or receive $900,000 per year for the next 25 years with the first payment starting one year from now. The winners opportunity cost or discount rate is r = 0.06. a. Which alternative will maximize the winners final wealth? b. The lotto company designed the payouts so that the present value of the payouts was the same from their perspective. Use the IRR approach to find the lotto companys opportunity cost of funds.
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