How much would you receive each year

Assignment Help Finance Basics

Reference no: EM131368380

Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annuitized $85 million paid out in 30 equal annual payments beginning immediately. The annual payment is determined by dividing the advertised prize by the number of payments. You now have up to 60 days to determine whether to take the cash prize or the annuity

a. If you were to choose the annuitized prize, how much would you receive each year?

b. The cash prize is the present value of the annuity payments. If interest rates are 7.5%, how much will you receive if you choose the cash option?

c. Now suppose that, as many lotteries do, the annuitized cash flows will grow by 3% per year to keep up with inflation, but they still add up to $85 million. In this case, the first payment will be $1,786,637.04 today. If you took the cash prize instead, how much would you receive (before taxes)?

Reference no: EM131368380

Questions Cloud

What return would you earn on the reversed cash flows : Now, suppose that you are offered another investment that is identical, except that the cash flows are reversed (i.e., cash flow 1 is 10,000, cash flow 2 is 15,000, etc). Is this worth more, or less, than the original investment? Why?

What challenges did you face : What challenges did you face? What have you learned from the experience?- What would you or will you change?

Select four examples of visual culture : Select four individual examples of visual culture studied since mid-term and discuss how they devalue and/or objectify women and/or those individuals who do not conform to a binary construction of gender.

Explain the purpose of a disaster recovery plan : The purpose of this assignment is for you to think critically about disaster recovery planning for cloud computing and why such a plan is important to a business. Compose a two-page paper that addresses each of the following:

How much would you receive each year : The cash prize is the present value of the annuity payments. If interest rates are 7.5%, how much will you receive if you choose the cash option?

Software development-improved hardware : What are the key components that have shaped informatics in the last 15 years? The last 5 years? The last 12 months? Is it mergers and acquisitions? Software development? Improved hardware? Regulations? New technology?

What type of research design did martin employ when working : What type of research design did Martin employ when working with Sara? According to the data, did the intervention that Martin selected work in modifying Sara's self-injurious behavior?

Types of release cycles : Linux distributions generally use two types of release cycles: standard releases and rolling releases. To understand the difference between these cycles, it is important to know how Linux distributions are put together.

What is the value of the stock today : If you expect that the dividend will grow at an 8% rate into the foreseeable future, what is the highest price at which you would recommend purchasing this stock to your clients?

User Account

All Pages