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    Present value of cash flows of two options

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    10. You decided to play the lottery and (congratulations!) you were the only winner of a jackpot valued at $50,000,000. You contact the lottery and they make you the following offer: $25,000,000 today in a lump sum or $2.5 million a year for the next 20 years paid annually at the end of each year. Assume you can get 10% return on your investments and that no taxes will be taken out. What is the PRESENT VALUE of each option (not Future Value)?

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    Solution Preview

    Option 1= $25,000,000 today

    Present value= $25,000,000

    Option 2

    $2.5 million a year for the next 20 years paid annually at the end of each year.
    ...

    Solution Summary

    The Present value of cash flows of two options is calculated to see which is better

    $2.19

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