E11-6 (Algo) Comparing Options Using Present Value Concepts [LO 11-S1] After hearing a knock at your front door, you are surprised to see the Prize Patrol from a large, well-known magazine subscription company. It has arrived with the good news that you are the big winner, having won $39 million. You have three options. (a) Receive $1.95 million per year for the next 20 years. (b) Have $12.75 million today. (c) Have $2.75 million today and receive $1,650,000 for each of the next 20 years. Your financial adviser tells you that it is reasonable to expect to earn 13 percent on investments Required: 1. Calculate the present value of each option. (Future Value of $1. Present Value of $1 Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Round your final answer to the nearest whole dollar. Enter your answers in dollars, not in millions.) Present Value 14 Option A Option B Option C $ $ $ 13 14 2. Determine which option you prefer. Option A Option B Optionc TABLE 11.4A Present Value of Annuity of $1 Periods 1 2 3 20 Periods* 1 2% 3% 3.75% 4% 4.25% 5% 6% 7% 8% 0.9804 0.9709 0.9639 0.9615 0.9592 0.9524 0.9434 0.9346 0.9259 1.9416 1.9135 1.8929 1.8861 1.8794 1.8594 1.8334 1.8080 1.7833 2.8839 2.8286 2.7883 2.7751 2.7620 2.7232 2.6730 2.6243 2.5771 3.8077 3.7171 3.6514 3.6299 3.6086 3.5460 3.4651 3.3872 3.3121 4.7135 4.5797 4.4833 4.4518 4.4207 4.3295 4.2124 4.1002 3.9927 5.6014 5.4172 5.2851 5.2421 5.1997 5.0757 4.9173 4.7665 4.6229 6.4720 6.2303 6.0579 6.0021 5.9470 5.7864 5.5824 5.3893 5.2064 7.3255 70197 6.8028 6.7327 6.6638 6.4632 6.2098 5.9713 5.7466 8.1622 77861 7.5208 7.4353 7.3513 71078 6.8017 6.5152 6.2469 8.9826 8.5302 8.2128 8.1109 8.0109 77217 7.3601 70236 6.7101 1 6.3514 14.8775 13.8962 13.5903 13.2944 12.4622 11.4699 10.5940 9.8181 9% 10% 11% 12% 13% 14% 15% 20% 25% 0.9174 0.9091 0.90090.8929 0.8550 0.8772 0.8696 0.8333 0.8000 1.7591 17355 1.7125 1.6901 1.6681 16467 1.6257 1.5278 1.4400 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 2.1065 1.9520 3.2397 3.1699 3.1024 3.0373 2.9745 2.9137 2.8550 2.5887 2.3616 3.8897 3.7908 3.6959 3.6048 3.5172 3.4331 3.3522 2.9906 2.6893 4.48594.3553 4.2305 4.1114 3.9975 3.8887 3.7845 3.3255 2.9514 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.1604 3.6046 3.1611 5.5348 5.33495.1461 4.9676 4.7988 4.6389 4.4873 3.8372 3.3289 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.7716 4.0310 3.4631 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 5.0188 4.1925 3.5705 9.1285 8.5136 7.9633 74694 7.0248 6.6231 6.2593 4.8696 3.9539 0 4 0 0 0 0 0 "There is one payment each period