Question
You have won the lottery and have three options as to how to receive your money. OPTION 1 - receive $50,000,000 today OPTION 2 -
You have won the lottery and have three options as to how to receive your money.
OPTION 1 - receive $50,000,000 today
OPTION 2 - receive $25,000,000 today and $1,000,000 a year over the next 30 years
OPTION 3 - receive $4,500,000/year for 30 years
Assuming any money received can be invested at 8% interest compounded annually.
A - Calculate the present value using the excel PV function of all options.
B - Calculate the future value, at year 30, using excel FV functions of all options.
C - Double check your answers using the discounting, compounding and equal payment formulas.
D - Explain which option makes the best economical sense.
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