Question
Congratulations! You just won your lawsuit against a major corporation for unethical business practices. As part of the settlement, you have been given two options
Congratulations! You just won your lawsuit against a major corporation for unethical business practices. As part of the settlement, you have been given two options to receive your money. The first option is receiving $2,000,000 at the beginning of each year for the next 5 years. The second option is that you can receive a lump sum payment today of $8.5 million. If the discount rate that you use to value the annuity is 6%, which option will provide you with the largest cash payout (ignoring taxes)?
annuity stream | ||
lump sum payment | ||
the options are equivalent | ||
cannot be determined |
Assume project A has cash flows over the next four years (in order) as follows: 1000, 1000, 1500, 1500. Project B has the following cash flows (in order) over the same four year period: 1500, 1500, 1000, 1000. If you plan to use the same discount rate for both projects, which of the following can never be true?
Project A is more valuable than B. | ||
Project B is more valuable than A. | ||
Projects A and B have the same value. | ||
None of the above; each one of the above statements could be true in certain instances. |
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