Mary Alice just won the lottery and is trying to decide between the options of receiving the annual cash flow payment option of $260,000 per year for 30 years beginning today, or receiving one lump-sum amount today. Mary Alice can earn 5% investing this money. At what lump-sum payment amount would she be indifferent between the two alternatives? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided and round final answer to nearest whole dollar amount.)
Multiple Choice
$7,800,000
$3,996,837
$4,456,678
$4,196,678
Present value = Amount*PVADF@5%
= 260000*16.14107
Present value = 4196678
Lump sum payment should be equal to $4196678
So answer is d) $4196678
Mary Alice just won the lottery and is trying to decide between the options of receiving...
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