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Why someone would choose to take a lump sum today

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Reference no: EM133012388

Problem 1: Why someone would choose to take a lump sum today instead of getting more cash if they took a series of payments over a number of years. Use the potential receipt of $5 million as a one-time payment or the option of receiving an annuity based on this amount. Use a discount rate of 4% and payoff period of 20 years to compute the annuity payments. Provide numerical examples to illustrate your explanation. Ignore taxes.

Reference no: EM133012388

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