Question
While in Duke for immersion, you stop by a Circle K convenience store to get gas and a drink. While youre at the counter you
While in Duke for immersion, you stop by a Circle K convenience store to get gas and a drink. While youre at the counter you realize you have an extra $5 in your pocket, and decide to buy a North Carolina scratch-off lottery ticket. With your last penny, you scratch off the boxes -- and BAM! -- You win $1,000,000!! Whoop Whoop! After taking out 40% in federal and state taxes, the lottery commission offers you two choices:
1) 10 equal annual installments, with the first one starting today or
2) a lump sum of cash today
a) If your cost of capital (required rate of return) is 5%, whats the minimum lump sum youd be willing to accept (i.e. an equivalent value between the two alternatives)?
b) List two (2) other considerations that might influence your decision about which alternative to take?
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