What is present value of the asset discounted cash flows

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Reference no: EM131967966

1. You’ve won a state lottery and have two choices of how you want your winnings to be paid to you. You can get $2,000,000 today or you can get $22,000 per month, starting next month, for 10 years. If your investments earn 5% APR (compounded monthly) which alternative has a higher present value terms and by how much?

The annuity is better by $640,000

The $2,000,000 is better by $74,190

The $2,000,000 is better by $640,000

The annuity is better by $74,190

None of the choices is correct

2. Peter Inc. has an asset with a Book Value of $700. It is expected to generate cash flows of $180 per year for the next four years. If the discount rate is 6%, then what is the Present Value of the Asset's Discounted Cash Flows?

a. $588

b. $624

c. $681

d. $720

Reference no: EM131967966

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