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Calculate present value of option b for power ball lottery

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Reference no: EM133000911

You just won the Power Ball Lottery worth $450,000,000. Upon reading the fine print you learn, that you have two options:

Option A: take the cash value of $310 million today (before taxes)
Option B: The winner is guaranteed to receive 30 graduated payments over 29 years; the first payment is made today. These payments will increase by 3% per year until the final payment. The first payment, received today, equals $18,500,000.

Problem 1: Assuming a required rate of return of 6%, calculate the present value of option B.

Reference no: EM133000911

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