Question

Johnson won a lottery with an option of receiving funds by one of the following methods:...

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)

Homework Answers

Answer #1

So the best option is option 3 as it has the highest PV among the alternatives.

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