Answer Happy

Kevin just won the lottery and must choose between three award options: 1. A lump sum of $20,000,000 received today 2. 15 end-of-year payments of $2,500,000 3. 40 end-of-year payments of $1,800,000 For each option in the table, indicate which values to enter for each variable in your financial calculator. Option 1. Option 2 Lump Sum Payment 15 Payments No. of Periods Annual payment Future Value Present Value $20,000,000 FV=0 Assume the interest rate is 8.00%, entered as 8 on your financial calculator. this, Kevin should choose option ? Now assume the interest rate is 9.00 %, entered as 9 on your financial calculator. this, Kevin should choose option Option 3 40 Payments Note: Take the absolute value of the present value when answering this question. Using the table you just filled out, along with a financial calculator, yields a present value for option 2 of approximately and a present value for option 3 of approximately if he seeks to maximize present value. FV=0 ? (when the interest rate is 8.00%). Based on Note: Take the absolute value of the present value when answering this question. Using the table you just filled out, along with your financial calculator, yields a present value for option 2 of approximately and a present value for option 3 of approximately if he seeks to maximize present value. (when the interest rate is 9.00%). Based on
Assume the interest rate is 10.00%, entered as 10 on your financial calculator. Note: Take the absolute value of the present value when answering this question. Using the table you just filled out, along with your financial calculator, yields a present value for option 2 of approximately and a present value for option 3 of approximately (when the interest rate is 10.00%). Based on this, Kevin should choose option if he seeks to maximize present value. As the interest rate increases, option 1 becomes attractive.