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Hank Sinatra, a struggling musician in his sophomore year of college, just won the lottery! He...

Hank Sinatra, a struggling musician in his sophomore year of college, just won the lottery! He has two options – he can collect his prize today in the amount of $500,000 OR he can collect his prize in 25 years in the amount of $2,500,000. If Hank can earn 7% on his investment for the next 25 years, which option should he take? Choose the option with the highest value

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Answer #1
option1 i.e. receive money today has the highest value
Statement showing Computations
Particulars Amount
Option 1
Present Value of option 1       500,000.00
Option 2
Present Value of option 2 =2,500,000/(1.07)^25       460,622.94
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