If you won the lottery for $10 million and you had the choice to take a...
If you won the lottery for $10 million and you had the choice to take a lump sum or payments over 20 years, a. which option would you choose? Why? b. What questions do you need answered before you decide? c. What situations may change your decision? Please cite your sources.
Homework Answers
i would prefer to take a lump sum amount if annuity payment over the 20 year period is same as of lump sum because due to inflation in the economy, time value of money will start decreasing and present value of lump sum would be more than the present value of 20 years annuity
before deciding the final selection of lump sum and the 20 years annuity, i would calculate the present value of annuity at a required rate of return of investor, and if after discounting the cash flow of 20 years annuity if the total present value of discounting cash flow of 20 years annuity is more than the lump sum then we would take 20 years annuity. here we would do a comparison of present value of lump sum offer with the present value of 20 years annuity.
My decision would change if the present value of sum of 20 years annuity is more than the present value of lump sum payment and vice versa
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