Suppose that in their divorce settlement, Mr. Billy offers Mrs. Melly to receive $1 million at the end of each year for a period of 5 years, but she instead demands $3 million now.

1. What's the Formula of the present value of a stream (of payments)? (From your textbook)

2. Using the formula from question 1, determine the present value of a stream of future annual payments of $1 million over a period of 5 years. Assume the discount rate is 8%.

3. Based on your answer from question 2, was the decision of Mrs. Melly to receive $3 million now a good decision? Explain your answer!