Find the present value of each alternative

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Reference no: EM132057128

You win the lottery! You have won $20,000,000, but a more careful examinationg of the terms and conditions means that you have won twenty $1,000,000 beginning-of-the-year cash flows with the first cash flow today.

Further, the lottery contract says that instead of waiting for so many years to collect your winnings, you could accept a lump sum check today int he amount of $12,000,000.

If you determine that the appropriate interest rate to compare these two alternatives is 6%, which alternative is preferred?

To answer this question, solve for the present value of each alternative and make your decision based strictly on the values. You may ignore taxes in your decision.

Reference no: EM132057128

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