You have won the lottery, and you must choose between three award options. You can select one of the following options: To receive a lump sum today of $75 million,To receive 10 end-of-year payments of $12 million,to receive 30 end-of-year payments of $8 million.If you expect to earn 9% annually:What is the present value of alternative ii?What is the present value of alternative iii?Which one you must choose?

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

You have won the lottery, and you must choose between three award options. You can select one of the following options: To receive a lump sum today of $75 million, To receive 10 end-of-year payments of $12 million,

You have won the lottery, and you must choose between three award options. You can select one of the following options: To receive a lump sum today of $75 million, To receive 10 end-of-year payments of $12 million,

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money

Section: Chapter Questions

Problem 9.20MCE

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Question

You have won the lottery, and you must choose between three award options. You can select one of the following options:

To receive a lump sum today of $75 million,
To receive 10 end-of-year payments of $12 million,
to receive 30 end-of-year payments of $8 million.

If you expect to earn 9% annually:

What is the present value of alternative ii?
What is the present value of alternative iii?
Which one you must choose?

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