Mary Alice just won the lottery and is trying to decide between the annual cash flow payment option of $250,000 per year for 25 years beginning today and the lump sum option. Mary Alice can earn 6 percent investing his money. At what lump-sum payment amount would she be indifferent between the two alternatives?
A)$6,250,000.
B)$3,195,840.
C)$3,637,590.
D)$3,387,590.$250,000 x 13.55036* = $3,387,590 *PVAD of $1: n=25; i=6%

Question

Quizplus · Accepted Answer

The lump-sum payment amount that would make Mary Alice indifferent is $3,387,590, which is the present value of the annuity due of $250,000 per year for 25 years at a 6% interest rate.

Mary Alice Just Won the Lottery and Is Trying to Decide