Question

Congratulations! You've won a state lotto! The state lottery offers you the following (after-tax) payout options: (Click the icon to view the payout options.) (Click the icon to view the present value factor table.) (Click the icon to view the present value annuity factor table.) (Click the icon to view the future value factor table.) 5 (Click the icon to view the future value annuity factor table.) Requirement Assuming that you can earn 8% on your funds, which option would you prefer? (Round your answers to the nearest whole dollar.) Data Table Option #1: $13,500,000 six years from now Option #2: $2,200,000 at the end of each year for the next five years Option #3: $12,500,000 four years from now Calculate the present value for each payout. Option #1: Option #2: Print Done Option #3: The option you would you prefer is the one that has the present value. Therefore, would be the preferred payout option. highest lowest

Answer 1

Calculate present value

Option #1 = 13500000*0.63017 = $8507295

Option #2 = 2200000*3.99271 = 8783962

Option #3 = 12500000*0.73503 = 9187875

The option would you prefer is the one that has the highest present value. Therefore Option 3 would be the preferred payout option