Which of the following best describes what the opportunity cost of capital for a project that has some element of risk would be:

Multiple Choice

• the expected rate of return on a government security having the same maturity as the project.

• the expected rate of return on a typical bond portfolio.

• the expected rate of return on a security of similar risk as the project.

• the expected rate of return on a well-diversified portfolio of common stocks.

18. Your friend plays the lottery, despite your advice that investing is more valuable. A few days later your friend's father wins the $52 million lottery prize which actually pays out $8.0 million a year for 20 years. The interest rate is 8.0%.

a. If the first payment comes after 1 year, what is the present value of his winnings? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the present value if the first payment comes immediately? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)