John Doe wins the lottery and may pick from the following three choices: Take $750 000 now. Take $1 000 000 ten years from now.
Take $90 000 at the end of this year, and at the end of each following year for ten instalments
In total.
Assume that John Doe uses a discount rate of 5% to evaluate his choices. If he selects the first option, how much is the present value of that alternative?
A) $450 000
B) $798 000
C) $750 000
D) $1 000 000
Correct Answer:
Verified
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