You just won the NY State Lottery. The Grand Prize is $275 million. Lottery officials give you a choice to receive the $275 million today, or you can receive $15 million per year for the next 25 years. What should you do, assuming interest will be stable at 2.5% per year for the entire period? Note: Ignore taxes and the utility of satisfying or delaying consumption. take the $275 million today since the upfront payment is less than the value of the annunity take the annuity of receiving $15m per year for 25 years since the upfront payment is less than the value of the annunity take the $275 million today since the upfront payment is greater than the value of the annunity take the annuity of receiving $15m per year for 25 years since the upfront payment is greater than the value of the annunity

Present value of annuities to be received in future would give the value of money today can be…

Answered: You just won the NY State Lottery. The…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter21: Supply Chains And Working Capital Management

Section: Chapter Questions

Problem 10P: The D.J. Masson Corporation needs to raise $500,000 for 1 year to supply working capital to a new...

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You just won the NY State Lottery. The Grand Prize is $275 million. Lottery officials give you a choice to receive the $275 million today, or you can receive $15 million per year for the next 25 years. What should you do, assuming interest will be stable at 2.5% per year for the entire period?

Note: Ignore taxes and the utility of satisfying or delaying consumption.

		take the $275 million today since the upfront payment is less than the value of the annunity
		take the annuity of receiving $15m per year for 25 years since the upfront payment is less than the value of the annunity
		take the $275 million today since the upfront payment is greater than the value of the annunity
		take the annuity of receiving $15m per year for 25 years since the upfront payment is greater than the value of the annunity

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