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You just won the lottery! You can either take half of the $65,000,000 in a lump sum today OR you can take yearly payments of $3,000,000 for 25 years (at the beginning of each year). Which option has a higher value to you if you can earn 9 percent per year on your Investments? A. You would prefer the lump sum because its present value is $3,032.261 higher than the present value of the payments. B. You would prefer the payments since their present value is $2,086,275 higher than the lump sum present value. C. You would prefer the payments since their present value is $1,273,033 higher than the lump sum present value. D. You would prefer the lump sum because its present value is $380,165 higher than the present value of the payments. E. None of the other choices are within $1.000 of the correct difference. You just won the lottery! You can either take half of the $65,000,000 in a lump sum today OR you can take yearly payments of $3,000,000 for 25 years (at the beginning of each year). Which option has a higher value to you if you can earn 9 percent per year on your Investments? A. You would prefer the lump sum because its present value is $3,032.261 higher than the present value of the payments. B. You would prefer the payments since their present value is $2,086,275 higher than the lump sum present value. C. You would prefer the payments since their present value is $1,273,033 higher than the lump sum present value. D. You would prefer the lump sum because its present value is $380,165 higher than the present value of the payments. E. None of the other choices are within $1.000 of the correct difference.
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SOLUTION To determine which option has a higher value we need to compare the present value of the lu... View the full answer
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
Posted Date:
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