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.
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.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Subject: accounting
Transcribed Image Text: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
7.02358
15
2.75903
036245
251290
910791
25
5.42743
014602
63 24090
11.65358
R
30
761226
013137
94.4608
12.40904
Either the lump sum payment today or the annuity payments for 30 years because they have the sante present value
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