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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)?

#### 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.
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#### Solution Summary

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

\$2.49