Problem 5-15 a,b and c

You just won a lottery that promises to pay you $1,000,000 exactly 10 years from today. Because the $1,000,000 payment is guar anteed by the state in which you live, opportunities exist to sell the claim today for an immediate single cash payment. What is the least you will sell your claim for if you can earn the following rates of return on similar-risk investments during the 10-year period? 6% 9% 12% Rework part a under the assumption that the $1,000,000 payment will be received in 15 rather than 10 years. On the basis of your findings in parts a and b, discuss the effect of both the size of the rate of return and the time until receipt of payment on the present value of a future sum. Time value comparisons of single amounts In exchange for a $20,000 payment to day, a well-known company will allow you to choose one of the alternatives shown in the following table. Your opportunity cost is 11%. Find the value today of each alternative. Are all the alternatives acceptable? That is, are they worth $20,000 today? Which alternative, if any, will you take