Michael has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $131,000 cash payment today. The second option is to receive $17,300 at the end of each of the next 19 years and a $32,100 lump sum payment in the 20th year. Michael can invest money at a 9% rate.

(a) Calculate the present value of the two options.

Which option should Michael choose to receive his winnings?

(b) If Michael could invest money at 12%, calculate the present value of the two options.

Which option should he choose?