Question
Suppose you won a $75,000 after-tax cash prize in the lottery. You want to start a new business that you think will lose money for
Suppose you won a $75,000 after-tax cash prize in the lottery. You want to start a new business that you think will lose money for a while, after which it will be up and running and bringing in big bucks. You plan to invest the funds immediately in securities that are expected to earn 10% per year. Suppose you would need only $20,000 per year during the start-up period. How long could you operate before you would require cash from the new business, i.e., how long could you receive payments of $20,000 per year? The first withdrawal will be made a year from today, and your answer will contain a fraction of a year. a. 4.93 years b. 6.56 years c. 4.44 years d. 5.42 years e. 5.97 years
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