Chapter 26, Question 2: Congratulations! You have won a state lottery. The state lottery offers you the following (after-tax) payout options: Payout Options:

Present Value of $1 table:

Present Value of Ordinary Annuity of $1 table:

Future Value of $1 table: Future Value of Ordinary Annuity of $1 table: Assuming you can earn 10% on your funds, which option would you prefer? **Please & Thank You!

Option #1: $13,000,000 after five years Option #2: $2,150,000 per year for five years Option #3: $11,000,000 after three years 0.813 0.233 0.322 0.135 0.229 10.239 | 0.084 Present Value of $1 Periods" % 2% 3% 4% 5% | 6% | 7% | 8% | 9% | 10% | 12% | 14% | 15% | 16% | 18% | 20% | 10.990 | 0.980 | 0.971 | 0.962 | 0.952 | 0.943 | 0.935 | 0.926 | 0.97 | 0.909 | 0.893 | 0.877 | 0.870 | 0.862 | 0.847 | 0.833 10.980 | 0.961 | 0.943 | 0.925 | 0.907 10.890 | 0.873 | 0.857 | 0.842 | 0.826 0.797 0.769 | 0.756 | 0.743 | 0.718 | | 0.694 0.971 | 0.942 1 0.915 10.889 10.864 10.840 10.816 10.794 | 0.772 10.751| 0.712 | 0.675 10.658 | 0.6411 0.609 | 0.579 0.961 | 0.924 | 0.888 0.855 | 0.823 | 0.792 10.763 10.735 | 0.708 | 0.683 0.636 10.592 | 0.572 | 0.552 | 0.516 0.482 0.951 10.906 | 0.863 0.822 10.784 10.747 0.713 10.681 | 0.650 10.621 0.567 0.519 10.497 | 0.476 | 0437 0.402 10.942 10.888 | 0.837 10.790 | 0.746 | 0.705 10.666 0.630 | 0.596 10.564 0.507 0.456 | 0.432 | 0410 | 0.370 0.335 0.933 10.871 0.760 10.711 | 0.665 10.623 0.583 | 10.547 0.513 0.452 0.400 10.376 | 0.354 10.314 0.279 0.923 0.789 0.731 | 0.677 | 0.627 10.582 0.540 | 0.502 10.467 0.404 0.351 | 0.327 || 10.305 0266 0.914 | 0.837 | 0.766 10.703 | 0.645 | 0.592 0.544 10.500 | 0.460 | 10.424 0.361 0.308 | 0.284 | 0.263 | 0.225 0.194 0.905 | 0.820 | 0.744 0.676 | 0.614 | 0.558 | 0.508 10.463 | 0.422 | 0.386 0.270 | 0.247 | 0.227 | 0.191 0.162 0.896 | 0.804 | 0.722 10.650 | 0.585 0.527 10.475 0.429 | 0.388 0.350 10.287 0.237 10.215 | 0.195 10.162 0.887 | 0.788 | 0.701 0.625 | 0.557 | 0.497 | 0.444 10.397 | 0.356 10.319 0.257 0.208 | 0.187 | 0.168 | 0.137 10.112 0.879 0.681 | 0.601 10.530 0.469 0.415 0.368 | 0.326 0.290 0.182 | 0.163 0.145 | 0.116 0.093 0.870 | 0.758 | 0.661 | | 0.577 | 0.505 | 0442 0.388 0.340 | 0.299 0.263 | 0.205 0.160 | 0.141 | 0.125 | 0.099 0.078 0.861 | 0.743 | 0.642 10.555 | 0.481 | | 0417 10.362 0.315 10.275 0.183 0.140 10.123 | 0.108 0.065 0.853 10.728 | 0.623 | 0.534 | 0.458 | 0.394 10.339 10.292 | 0.252 10.218 10.163 10.123 10.107 10.093 | 0.071 0.054 0.844 0.714 | 0.605 10.513 | 0.436 | 0.371 10.317 0.270 0.231 0.198 0.146 10.108 | 0.093 | 0.080 10.060 10.045 0.836 | 0.700 | 0.587 10.494 0416 | 0.350 | 0.296 0.250 10.212 0.180 | 0.130 | 0.095 | 0.081| 0.069 | 0.051 10.038 0.828 0.686 | 0.570 | 0475 10.396 | 0.331 10.277 10.232 0.194 0.164 0.083 10.070 | 0.060 10.043 0.031 0.820 | 0.673 | 0.554 10.456 0.377 10.312 10.258 0.215 10.178 0.149 0.104 0.073 10.061 0.051 0.026 0.811 10.660 | 0.538 10.439 | 0.359 10.294 0.242 0.199 | 0.164 0.135 0.093 0.064 | 0.053 0.044 10.031 10.022 0.803 | 0.647 | 0.522 10.422 | 0.342 0.278 0.226 0.184 10.150 0.123 0.083 0.056 10.046 | 0.038 | 0.026 10.018 0.795 | 0.634 10.507 0.406 | 0.326 0.262 0.211 0.170 10.138 0.112 0.074 0.049 10.040 | 0.033 0.022 10.015 0.788 | 0.622 | 0.492 0.390 10.310 10.247 0.197 0.158 10.126 0.102 10.043 10.035 10.028 10.013 0.780 | 0.610 | 0.478 10.375 0.295 10.233 0.184 0.146 10.116 0.092 0.038 10.030 | 0.024 0.016 0.010 0.772 10.598 | 0.464 0.361 | 0.281 10.220 0.172 0.135 10.106 0.084 0.053 0.033 | 0.026 | 0.021 | 0.014 0.009 0.764 | 0.586 | 0.450 10.347 | 0.268 | 0.207 0.161 0.125 | 0.098 10.076 0.029 | 0.023 | 0.018 | 0.011 10.007 0.757 | 0.574 | 0.437 | 0.333 | 0.255 | 0.196 10.150 10.116 | 0.090 | 0.069 10.042 10.026 | 0.020 | 0.016 | 0.010 | 0.006 0.749 10.563 | 0.424 0.321/ 10.243 | 0.185 | 0.141 0.107 | | 0.082 0.037 0.022 | 0. 07 | 0.014 0.008 0.005 0.742 | 0.552 | 0.412 | 0.231 | 0.174 | 0.131 0.099 | 0.075 0.057 10.020 | 0.015 | 0.012 0.007 0.004 0.672 | 0.453 | 0.307 10.208 | 0.142 | 0.097 | 0.067 10.046 | 0.032 0.022 10.005 | 0.004 | 0.003 | 0.001 10.001 | 0.372 0.228 | 0.41 | 0.087 | 0.054 | 0.034 | 0.013 | 0.009 | 0.003 | 0.001 | 0.001 | 0.001 0.116 | 678go HQSH66898a884898 mg 0.037 0.066 0.019 0.059 0.047 0.063 0.308 0.011 | 0.608 0021 2.829 4.853 4.212 3.890 4.486 13.498 5.582 7.652 7.435 4.327 Present Value of Ordinary Annuity of $1 | Periods| % | 2% | 3% | 4% | 5% | 6% | 7% | 8% | 9% | 10% | 12% | 14% | 15% | 16% | 18% | 20% 0.990 | 0.980 | 0.971 | | 0.962 || 0.952 | 0.943 | 0.935 | 0.926 | 0.917 | 0.909 || 0.893 0.877 0.870 | 0.862 | 0.847 | 10.833 1.970 | 1.942 | 1.913 | 1.886 1.859 1.833 1.808 | 1.783 | 1.759 1.736 | 1.690 1.647 1.626 1.605 | 1.566 | 1.528 2.941 2.884 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.402 2.322 2.283 2.246 | 2.174 2.106 3.902 3.808 3.717 3.630 13.546 3.465 13.387 3.312 3.240 3.170 3.037 2914 2.855 2.798 2.690 2.589 4.713 4.580 | 4.452 4.329 4.100 3.993 3.791 3605 3.433 3.352 3274 3.127 2.991 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.355 4.111 3.889 3.784 3.685 3.326 6.728 6.472 6.230 6.002 5.786 5.389 5.206 5.033 4.868 4.564 4.288 4. 160 4.039 3.812 3.605 7.325 7.020 6.733 6.463 6.210 5.971 15.747 5.535 5.335 4.968 4.639 4.487 4.344 4.078 3.837 8.566 | 8.162 7786 17.108 6802 6.515 | 6.247 5.995 5.759 5.328 4.946 4.772 4.607 4.303 4.031 9.471 8.983 | 8.530 8.11 7.722 7.360 17.024 | 6.710 6418 6.145 5.650 5.216 5.019 4.833 4.494 4.192 10.368 | 9.787 | 9.253 | 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.938 5453 5.234 5.029 4.656 11.255 | 10.575|3954 | 19.385 8.863 8.384 7.943 | 7.536 7.161 6.814 6.194 5.660 5.421 5.197 4.793 4.439 12.134 | 11.348 | 10.635 | 9.986 19.394 | 8.853 18.358 || 7.904 7.487 7.103 6.424 5.842 5.583 5.342 | 4.910 4.533 13.004 | 12.106 | 1.296 | 10.563 9.899 9.295 | 8.745 8.244 7.786 7.367 6.628 6.002 5.724 5.468 5.008 4.611 13.865 | 12.849 | 11.938 | 11.118| 10.380 9712 | 9.108 8.559 8.061 7.606 6.811 6.142 5.847 5.575 5.092 4.675 14.718 | 13.578 | 12.561| 11.652 | 10.838 10.106 | 9447 | 8.851 8.313 7.824 6.974 6.265 5.954 5.669 5.162 4.730 15.562 | 14.292 | 13.166 | 12.166 | 11.274 | 10.477 | 9.763 | 9.122 8.544 8.022 7.120 6.373 6.047 15.749 5.222 4.775 16.398 | 14.992 | 13.754 | 12.659 | 11.690 | | 10.059 | 9.372 8.756 8.201 7.250 6.467 6.128 5818 5.273 4.812 7.226 | 15.678 | 14.324 | 13.134 | 12.085 | 1.158 | 10.336 | 9.604 8.950 8.365 7.366 6.550 6.198 5.877 5.316 4.844 18.046 | 16.351| 14.877 | 13.590 | 12.462 11.470 | 10.594 | 9.818 19.129 8.514 7469 6.623 6.259 | | 5.929 5.353 14.870 18.857 | 17011 | 15.415 | 14.029 | 12.821 | 11.764 | 10.836 | 10.017 9.292 8.649 7.562 6.687 6.312 15.973 | 5.384 4.891 19.660 | 17.658 | 15.937 14.451 13.163|12.042|1.061|10.2011 3442 18.77217.645 16.743 6.359 | 6.01 5.410 4.909 20.456 | 18.292 | 16.444 | 14.857 13.489 | 12.303 |1.272 | 10.371] 9.580 18.883 | 7718 | 6.792 6.399 6.044 | 5.432 4.925 21.243 | 18.914| 16.936 | 15.247 13.799 | 12.550|1.469 |10.529| 3.707 18.985 | 784 | 6.835 6.073 5.451 4.937 22.023 | | 19.523 | 17.413 || 15.622 | 14.094 12.783 | 11.654 | 10.675 | 9.823 9.077 7.843 6.873 6.464 6.097 | 5.467 4.948 22.795 | 20.121| 17.877 | 15.983 | 14.375 13.003 | 11.826 | 10.810 | 9929 19.161 7.896 6.906 6.491 6.118 | 5480 4.956 23.560 | 20.707 18.327 | 16.330 | 14.643 | 13.211111.987 | 10.935 |10.02719.237 7.943 6.935 6.514 | 6.136 | 5.492 4.964 28118.764 | 16.663|14.898 | 13.406 | 12.137 | 11.051 | 10.116 19.307 7.984 6.961 6.534 16.152 | 5.502 4.970 25.066 | 21.844 | 19.188 | 16.984| 15.141 13.591 | 12.278 | 11.158 | 10.198 19.370 8.022 | 6.983 6.551 | 6.166 | 5.510 4.975 25.808 | 22.396 | 19.600 | 17.292 | 15.372 13.765 | 12.409 | 11.258 | 10.274 9.427 8.055 7.003 6.566 6.177 5.517 4.979 32.835 | 27.355 | 23.115 | 19.793 | 17.159 | 15.046 | 13.332 | 11.925 | 10.757 | 19779 8.244 7.105 6642 | 6.233 | 5.548 4.997 39.196 | 31.424 | 25.730|21482 | 18.256 | 15.762 | 13.801 | 12.233 | 10.962] 9.95] | 6.661 | 6.246 | 5.554 4.999 6.434 Periods 1.072 2.211 3.059 1.629 2012 3.138 1.886 2.133 2.261 3.342 | 7.138 Future Value of $1 1% | 2% | | 3% | 4% | 5% | 6% | 7% | 8% | 9% | | 10% | | 14% | 15% 1.010 | 1.020 | 1.030 1.040 || 1.050 | 1.060 | 1.070 | 1.080 || 1.090 1.100 1.120 | 1.140 1.150 1.020 | 1.040 1.061 | 1.082 1.103 | 1.124 | 1.145 | 1.166 1.188 | 1.210 ] 1.254 | 1.300 1.323 1.030 | 1.061 1.093 1.125 1.158 | 1.191 | 1.225 1.260 1.295 | 1.331 1.405 | | 1.482 1.521 1.041 | 1.082 1.126 1.170 1.216 | 1262 | 1311 | 1.360 1.412 1.464 1.689 1.749 1.051 1.104 1.159 1.217 1.276 | 1.338 1.403 1.469 1.539 1.611 1.762 1.925 2.011 1.062 | 1.126 1.194 1.265 1.340 | 1.419 1.501 | 1.587 1.677 1.772 1.974 2.195 2.313 1.149 1.230 1.316 1407 | 1.504 1.606 1.714 1828 1.949 2.502 2.660 1.083 | 1.172 1.267 1.369 1477 | 1.594 1.718 | 1.851 1.993 2.144 2.476 2.853 1.094 | 1195 1.305 1423 1.551 | 1.689 1.838 1999 2.172 2.358 2.773 3.252 3.518 1.105 | 1.219 1.344 1.480 | 1.791 1.967 2.159 2.367 2.594 3.106 3.707 4.046 1.116 | 1.243 1.384 1.539 1.710 | 1.898 2.105 2.332 2.580 2.853 3.479 4.226 4.652 1127 | 1.268 1.426 1.601 1.796 2.252 2.518 2813 3.896 4.818 5.350 1.138 | 1294 1.469 1.665 2.410 2.720 3.066 3452 4.363 5.492 6.153 1.149 1.319 1513 1.732 1980 2.579 2.937 3.798 4.887 6.261 7.076 1.161 | 1.346 1.558 1801 2.079 2.397 2.759 3.172 3.642 4.177 5474 8.137 1.173 | 1373 1.605 1873 2.183 2.540 2.952 3.426 3.970 4.595 6.130 | 8.137 9.358 1.184 1.400 1.653 1.948 2.292 2.693 3.159 3.700 4.328 5.054 16.866 | 9.276 10.76 1.196 1.428 1.702 2.026 2.407 2.854 3.380 3.996 4.717 5.560 7.690 10.58 12.38 1.208 1.754 2.107 2527 3.026 3.617 4.316 5.142 6.116 | 8613 12.06 14.23 1.220 | 1486 1.806 2.653 3.207 | 3870 4.661 5.604 6.727 | 9646 13.74 16.37 1.232 | 1.516 1.860 2.279 2.786 3400 4.141 5.034 6.109 7.400 10.80 15.67 18.82 | 1.546 1.916 2.370 2.925 3.604 4.430 5.437 6.659 8.140 12.10 17.86 21.64 1.257 | 1.577 1.974 2465 3.072 3.820 4.741 5871 7.258 8.954 20.36 24.89 1.270 1608 2.033 2.563 3.225 4.049 5.072 6.341 7.91 19850 15.18 23.21 28.63 1.282 | 1.641 2.094 2.666 3.386 4.292 5427 8.623 17.00 26.46 32.92 1.295 | 1.673 2.157 2.772 3.556 4.549 5.807 7.396 9.399 | 11.92 19.04 30.17 37.86 1.308 | 1.707 2.221 2883 4.822 16.214 | 7.988 10.25 13.11 21.32 34.39 43.54 1.321 | 1741 2.288 2.999 3.920 5.112 | 6.649 8.627 11.17 14.42 23.88 39.20 50.07 1.335 | 1.776 2.357 3.119 4.116 5.418 | 7.114 | 9317 12.17 15.86 26.75 44.69 57.58 1.348 1.811 3.243 4.322 5.743 17.612 10.06 13.27 7.45 29.96 50.95 66.21 1.489 12.208 3.262 4.801 7.040 10.29 || 14.97 21.72 31.41 45.26 93.05 188.9 267.9 1.645 | 2692 | 14.384 | 18.42 | 29.46 | 46.90 74.36 | 4| 289.0 | 700.2 1,084 | 1.457 2191 1.2451 13.55 6.848 10.83 3.733 2427 IZ107 5.101 5.416 5.985 6.742 11.07 12.01 15.97 7.09 32.39 Future Value of Ordinary Annuity of $1 Periods | 1% | 2% | 3% | 4% | 5% | 6% | 7% | 8% | 9% 10% | 12% | 14% | 15% 1.000 | 1.000 | 1.000 | 1.000 || 11.000 | 1.000 | 1.000 | 1.000 1.000 || 1.000 | 1.000 | 1.000 1.000 2010 | 2.020 | 2.030 | 2.040 | 2.050 | 2.060 2.070 | | 2.080 2.090 2.100 | 2.120 2.140 2.150 3.030 | 3.060 || 3.091 | 3.122 13.153 3.184 3.215 3.246 3.278 3.310 | 3.374 3440 3.473 4.060 | 4.122 4.184 | 4.246 14.310 4.375 4.440 4.506 4.573 4.641 || 14.779 4.921 4.993 5.204 5.309 5.526 5.637 5.751 5.867 6.105 6.353 6.610 6.152 | 6.308 | 6.468 | 6.633 16.802 6.975 7.153 7.336 7.523 7.716 8.115 8.536 8.754 7.214 7.434 7.662 7.898 8.142 8.394 8.654 8.923 9.200 9487 10.03 10.73 8.286 | 18.583 8.892 9.214 9.549 19897 10.260 10.64 11.03 11.44 12.30 13.23 3.73 9.369 19.755 10.16 10.58 11.03 | 1.49 | 11.98 12.49 13.02 13.58 14.78 16.09 16.79 10.46 | 10.95 11.46 12.58 | 13.18 13.82 14.49 15.19 15.94 17.55 19.34 20.30 11.57 | 12.17 12.81 13.49 14.21 | 14.97 15.78 16.65 7.56 18.53 20.65 23.04 24.35 12.68 | 1341 | | 14.19 15.03 15.92 | 16.87 17.89 18.98 20.14 21.38 24.13 27.27 29.00 13.81 | 14.68 15.62 16.63 7.71 || 18.88 20.14 121.50 22.95 24.52 28.03 32.09 34.35 14.95 18.29 19.60 21.02 22.55 24.21 26.02 27.98 37.58 40.50 16.10 | 1729 18.60 20.02 21.58 23.28 25.13 27.15 29.36 31.77 37.28 43.84 47.58 17.26 18.64 20.16 21.82 23.66 25.67 27.89 30.32 33.00 35.95 42.75 50.98 55.72 18.43 20.01 21.76 23.70 25.84 28.21 30.84 33.75 36.97 40.54 48.88 59.12 65.08 1961 21.41 23.41 25.65 28.13 30.91 34.00 37.45 41.30 45.60 55.75 68.39 22.84 25.12 27.67 30.54 33.76 37.38 41.45 46.02 51.16 63.44 78.97 88.21 24.30 26.87 29.78 33.07 41.00 45.76 51.16 57.28 72.05 91.02 102.4 25.78 28.68 31.97 35.72 44.87 50.42 56.76 64.00 81.70 104.8 1188 27.30 - 30.54 134.25 38.51 43.39 49.01 55.46 62.87 71.40 192.50 120.4 137.6 25.72 28.85 32.45 | 36.62 41.43 47.00 53.44 60.89 69.53 79.54 | 104.6 138.3 159.3 26.97 30.42 34.43 39.08 44.50 50.82 58.18 66.76 76.79 88.50 | 118.2 158.7 184.2 28.24 32.03 36.46 41.65 47.73 54.86 63.25 73.11 84.70 98.35 181.9 212.8 29.53 33.67 38.55 44.31 51.11 59.16 68.68 79.95 1092 150.3 208.3 245.7 35.34 40.71 47.08 54.67 63.71 74.48 87.35 102.7 | 121.1 169.4 238.5 283.6 32.13 37.05 42.93 49.97 58.40 68.53 80.70 - 95.34 113.0 134.2 190.7 2729 327.1 33.45 38.79 45.22 52.97 62.32 73.64 87.35 104.0 124.1 148.6 214.6 312.11 377.2 34.78 40.57 47.58 56.08 66.44 79.06 94.46 113.3 136.3 164.5 2413 356.8 434.7 48.89 | 60.40 | 75.40 | 95.03 1208 199.6 | 259.1 | 337.9 42.6 767.1 | 1.342 1,779 | 84.58 | 1128 | 152.7 | 209.3 | 290.3 | 406.5 | 5738 | 815.1 | 1.164 |2.400 | 4.995 7.218 75.84 20.81 22.02 36.79 23.24 39.99 1333 93.32 30.82 154.8 The present value of the payout is: (Round your answers to the nearest whole dollar) Option #1: Option #2: Option #3: (Enter your answer as a numerale.g., 1.) has the highest present value using the 8% discount rate. Therefore, it appears to be the most Payout Option # favorable option