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As the Winner of the Housecleaners Sweepstakes, You Are Entitled

Question 73

Essay

As the winner of the Housecleaners sweepstakes, you are entitled to one of the following prizes:
A. $999,999 immediately.
B. $100,000 per year forever.
C. $180,000 per year for the next 10 years starting immediately.
D. $400,000 payable every 2 years over 20 years.
E. $39,000 next year growing by 6% forever.
In terms of present values, which prize should be chosen if r = 9%?
PV = $999,999
PV = $1,111,111
PV = $1,259,144
PV = $1,747,090
PV = $1,300,000

Correct Answer:

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PV = $999,999
PV = $...

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