Jack just discovered that he holds the winning ticket for the $87 million mega lottery in Missouri.

Question:

Jack just discovered that he holds the winning ticket for the $87 million mega lottery in Missouri. Now he needs to decide which alternative to choose: (1) a $44 million lump-sum payment today or (2) a payment of $2.9 million per year for 30 years. The first payment will be made today. If Jack’s is 5 percent, which alternative should he choose?

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...