3.34 (LG 3.5) Gail has won a lottery that pays her $100 000 at the end of this year, $110 000 at the end of next year, $120 000 the following year, and so on, for 30 years. Leon has offered Gail $2 500 000 today in exchange for all the money she will receive. If Gail can get 8 percent interest on her savings, is this a good deal?

3.34 (LG 3.5) Gail has won a lottery that pays her $100 000 at the end of this year, $110 000 at the end of next year, $120 000 the following year, and so on, for 30 years. Leon has offered Gail $2 500 000 today in exchange for all the money she will receive. If Gail can get 8 percent interest on her savings, is this a good deal?

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance

Section: Chapter Questions

Problem 14PAE

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Gail has won a lottery that pays her $100,000 at the end of this year and increases by 15 percent per year thereafter for 30 years. Leon has offered Gail $10,500,000 today in exchange for all the money she will receive. If Gail can get 6 percent interest on her savings, is this a good deal? What is the present value of the lottery winnings?
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