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Calculate the present value of the two options

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Question - Charles has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash payment today. The second option is to receive $21,600 at the end of each of the next 19 years and a $28,100 lump sum payment in the 20th year. Charles can invest money at a 10% rate.

Calculate the present value of the two options. Which option should Charles choose to receive his winnings?

If Charles could invest money at 13%, calculate the present value of the two options. Which option should he choose?

Reference no: EM133019762

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