Congratulations! You\'ve won a state lotto! The state lottery offers you the fol

Question

Congratulations! You've won a state lotto! The state lottery offers you the following (after-tax) payout options Option #1 : $14,500,000 four years from now Option #2: $2,300,000 at the end of each year for the next five years Option #3: $14,000,000 three years from now (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) (Click the icon to view the future value factor table.) (Click the icon to view the future value annuity factor table.) Requirement Assuming that you can earn 10% on your funds, which option would you prefer? (Round your answers to the nearest whole dollar Calculate the present value for each payout. Option #1: Option #29 Option #3: has the highest present value using the 10% discount rate. Therefore, it appears to be the most Payout Option #1 favorable option

Explanation / Answer

Option 1 Present value

Use Excel fuction

PV(0.10,4,0,-14500000,0)

= $9903695

Option 2 Present value

Use Excel fuction

PV(0.10,5,-2300000,0,0)

= $8718810

Option 3 Present value

Use Excel fuction

PV(0.10,3,0,-14000000,0)

= $10518407

Option #3 has highest Payout value

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.