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Donald has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $130,000 cash payment
Donald has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $130,000 cash payment today. The second option is to receive $22,200 at the end of each of the next 19 years and a $32,400 lump sum payment in the 20th year. Donald can invest money at a 7% rate. Click here to view the factor table. (a) Calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.) Option 1 Option 2 Present value 130000 235755 Which option should Donald choose to receive his winnings? Option 2 (b) If Donald could invest money at 10%, calculate the present value of the two options. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to O decimal place, e.g. 58,971.) Option 1 Option 2 Present value 130000 188842 Which option should he choose? Option 2 v
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