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You have just won a magazine sweepstake and have a choice of three alternatives: Option 1: receive $50,000 now and $150,000 at the end of
You have just won a magazine sweepstake and have a choice of three alternatives: Option 1: receive $50,000 now and $150,000 at the end of 10 years Option 2: receive $10,000 per year in perpetuity Option 3: receive $100,000 now If the appropriate discount rate is 11%, which option should you choose? You are indifferent between the three options. $10,000 perpetuity $50,000 now and $150,000 in 10 years $100,000 now
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