Johnson won a lottery with an option of receiving funds by one
of the following methods: Johnson can receive a lump sum of
$2,000,000, OR, $ 3,000,000 in five years, OR, $1,000,000, now,
with $700K next year and $ 850K in both year 6 and in
year 7.
Which option is best for Johnson with a rate of 7% a year? Solve in
Excel, if possible, please make a column for labels. (Such as
column a has the labels and column b has the numeric values)
So the best option is option 3 as it has the highest PV among the alternatives.
Formulae
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