Question

Mary Alice just won the lottery and is trying to decide between the options of receiving the annual cash flow payment option of $420,000 per year for 25 years beginning today, or receiving one lump-sum amount today. Mary Alice can earn 6% investing this money. At what lump-sum payment amount would she be indifferent between the two alternatives? (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided and round final answer to nearest whole dollar amount.)A. $5,369,011B. $6,111,151C. $5,691,151D. $10,500,000

Answer 1

C. $5,691,151

Step-by-step explanation:

At what lump-sum payment amount would she be indifferent between the two alternatives?

Mary Alice just won the lottery and is trying to decide between the options of receiving the annual cash flow payment option of $420,000

$420,000 x 13.55036* = $5,691,151

*PVAD of $1: n = 25; i = 6%