Joey is one of several winners who shared a lottery ticket. There are three plans offered to
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Question:
Joey is one of several winners who shared a lottery ticket. There are three plans offered to receive the after-tax proceeds.
Plan 1: $100,000 now
Plan 2: $15,000 per year for 8 years beginning 1 year from now. Total is $120,000.
Plan 3: $45,000 now, another $45,000 four years from now, and a final $45,000 eight years from now. Total is $135,000.
Joey, a quite conservative person financially, plans to invest all of the proceeds as he receives them. He expects to make a real return of 6% per year. Use the 8-year time frame and average inflation of 4% per year to determine which plan provides the best deal.
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