Class Problem 2 - Dr. Swanbom has just won $100,000,000 in the lottery and is about to resign his position at the university. Before he does, he needs some financial advice from his ENGR 122 students. Should he (1) take the $100,000,000 in the form of annual payments of $5,000,000 for the next 20 years, or (2) take $40,000,000 as a lump sum payment now? Assume that with both options he won't spend any of the money, but will instead invest all of it at 9% interest compounded yearly. Neglect the effect of taxes on both options.

Class Problem 2 - Dr. Swanbom has just won $100,000,000 in the lottery and is about to resign his position at the university. Before he does, he needs some financial advice from his ENGR 122 students. Should he (1) take the $100,000,000 in the form of annual payments of $5,000,000 for the next 20 years, or (2) take $40,000,000 as a lump sum payment now? Assume that with both options he won't spend any of the money, but will instead invest all of it at 9% interest compounded yearly. Neglect the effect of taxes on both options.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 8E

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