Susie has just won the provincial lottery and has been offered the following choices of prizes:...
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Susie has just won the provincial lottery and has been offered the following choices of prizes: (i) $6,400,000 today, OR (ii) $250,000 per year at the end of each year in perpetuity (forever), OR (iii) $550,000 at the beginning of the year for the next 10 years (starting today) plus one payment of $2,500,000 at the end of the 10th, If Susie can earn an effective annual return of 4% on funds invested, which option should she choose? Briefly explain your choice. Evaluate these options solely based on PRESENT VALUE analysis. Susie has just won the provincial lottery and has been offered the following choices of prizes: (i) $6,400,000 today, OR (ii) $250,000 per year at the end of each year in perpetuity (forever), OR (iii) $550,000 at the beginning of the year for the next 10 years (starting today) plus one payment of $2,500,000 at the end of the 10th, If Susie can earn an effective annual return of 4% on funds invested, which option should she choose? Briefly explain your choice. Evaluate these options solely based on PRESENT VALUE analysis.
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Heres a present value analysis of Susies three options using a 4 effective annual return i 6400000 t... View the full answer
Related Book For
Financial Accounting An Integrated Statements Approach
ISBN: 978-0324312119
2nd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
Posted Date:
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