Natalie won the lottery and is deciding between the options of receiving the annual payment option of $450,000 per year for 25 years beginning today, or receiving one lump-sum amount today. Natalie can earn 5% investing this money. At what lump-sum payment amount would she be indifferent between the two alternatives?

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A:

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A: The present value is the value of the sum received at time 0 or the current period. It is the value…

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A: present value of annuity (PVA) formula: PVA=A×1-11+rnrwhere,A=annuityr=rate of interestn=number of…

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A: Present Value: The value of today’s amount expected to be paid or received in the future at a…

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A: This question relates to the application of time value of money. We will compute the present value…

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A: Present value  = Future value/(1+pir)^n

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A: Honor code: Since you have posted a question with multiple sub-parts, we will solve the first three…

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A:

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A: Semi annual interest rate = 3%

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A:

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A: Series of payment made at equal interval is called Annuity.

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A: The effective interest is the interest rate after considering the impact of compounding on interest…

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A: The question gives the following information:

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A: Present Value: The present value is the value of the sum received at time 0 or the current period.…

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A: The present Value is the present worth of the amount that will be paid/received in the future.

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A: Formula required  Present value FACTOR =1-(1+r)^-n/r  Present value =Future value/(1+r)n r=interest…

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A: Answer a: Computation of NPV of each option: Since the NPV of Option 3 is more, it is recommended.

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A: Total present value = Present value of annual cash flows + Present value of lumpsum amount

Q: Julie has just retired. Her company’s retirement program has two options as to how retirement…

A: Given: The first option includes lump sum of $150,000 immediately. The second option includes…

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A: Given information :

Q: Assume that you just won the state lottery. Your prize can be taken either in the form of $40,000 at…

A: Present value is the current worth of future cashflows discounted at any given rate.