E4-19 (Appendix 4A: The highest present value) Congratulations! You have just won the lottery. The lottery board offers you three different options for collecting your winnings: 1.

You will receive payments of $500,000 at the end of each year for twenty years. 2.

You will receive a lump-sum payment of $4,500,000 today. 3.

You will receive a lump-sum payment of $1 million today and payments of $2,100,000 at the end of Years 5, 6 and 7.

Assume that all earnings can be invested at a 10 percent annual rate. Chapter 4 The Measurement Fundamentals of Financial Accounting 171 REQUIRED: Which option should you choose and why?