The top prize for the state lottery is $105,000,000. You have decided it is time for you to take a chance and purchase a ticket. Before you purchase the ticket, you must decide whether to choose the cash option or the annual payment option. If you choose the annual payment option and win, you will receive $105,000,000 in 20 equal payments of $5,250,000—one payment today and one payment at the end of each of the next 19 years. If you choose the cash payment, you will receive a one-time lump sum payment of $63,830,111.58. You can invest the proceeds and earn 7%. At what interest rate would you be indifferent between the cash and annual payment options? (Round factor values to 3 decimal places, e.g. 1.521 and final answer to 0 decimal places, e.g. 15%.) Click here to view the PV Table. Interest rate %

The top prize for the state lottery is $105,000,000. You have decided it is time for you to take a chance and purchase a ticket. Before you purchase the ticket, you must decide whether to choose the cash option or the annual payment option. If you choose the annual payment option and win, you will receive $105,000,000 in 20 equal payments of $5,250,000—one payment today and one payment at the end of each of the next 19 years. If you choose the cash payment, you will receive a one-time lump sum payment of $63,830,111.58. You can invest the proceeds and earn 7%. At what interest rate would you be indifferent between the cash and annual payment options? (Round factor values to 3 decimal places, e.g. 1.521 and final answer to 0 decimal places, e.g. 15%.) Click here to view the PV Table. Interest rate %

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 7E

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