Randy just won the Powerball Jackpot for $5,000,000. Randy has the option to take a lump sum payment of $3 million now or receive payments of $200,000 at the end of the year for the next 30 years or receive a one-time payment of $5,000,000 in 15 years. Assuming rate of 7% and ignoring taxes, should Randy choose the lump sum payment now, the annuity payments, or the lump sum payment in 15 years? Below are present and future value factors at 7% Periods Future Value of $1 Present Value of $1 Future Value of an ordinary annuity Present Value of an ordinary annuity Multiple Choice 10 1.96715 0.50835 13.8164 702358 15 2.75903 036245 251290 910791 25 5.42743 014602 63.24090 11.65358 D 30 761226 013137 94.4608 12.40904 Either the lump sum payment today or the annuity payments for 30 years because they have the same present value.

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