You win the lottery for $20 million!
You have a choice to take $1 million now and $1 million for the next 19 years
OR take $10.6 million today.
Assume you expect to earn 6% on your investments.
Hint: You are actually comparing a 19 year annuity @ $1 million a year vs. $9.6 million ($10.6 minus $1). You need to find out what discount rate gets you to a PV of $9.6 million today on the 19 year annuity of $1 million a year.© BrainMass Inc. brainmass.com October 2, 2020, 1:27 am ad1c9bdddf
This solution contains step-by-step calculations to determine the present value of annual cash flows.