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Calculate the present value of prize

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Reference no: EM132978868

Cat Bearpaw has just won a sweepstakes and can choose between three prizes.

a. $500,000 received 5 years from now.

b. $100,000 now, plus $100,000 next year, plus $100,000 in two years.

c. $40,000 per year for each of the next thirty years. The first payment occurs in 1 year.

The interest rate is 16% per year.

Calculate the present value of each prize. Which prize is most valuable?

Reference no: EM132978868

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