Laura James just won the lottery of $2.5 million dollars.  She is given two options to receive her winnings after tax deductions:

a)  Take an annual payment for the next 10 years of $225,000; or

b)  Take a lump sum three times.  $1,000,000 up front, & $500,000 each at the end of year 5 & 10 respectively.

Requirement:  

Advise Laura on which option she should take based on your calculations using 5% interest rate.

Answer rating: 100% (QA)

Answer Explanation i Discounting is a technique which is used to compute the present val... View the full answer