Question
Congratulations! You won the lottery. The state lottery office has offered you three payout options: Receive $100,000,000 in cash today. Receive $25,000,000 today and $9,000,000
Congratulations! You won the lottery. The state lottery office has offered you three payout options:
Receive $100,000,000 in cash today.
Receive $25,000,000 today and $9,000,000 per year for 8 years, with the first payment being received one year from today.
Receive $15,000,000 per year for 10 years, with the first payment being received one year from today.
Assuming an effective rate of interest of 7%, which payout option should you select? Use the present value tables of $1 and present value of annuity tables in Appendix A of your textbook to calculate and compare the alternatives. Show your calculations.
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