Suppose that Clint wins the lottery jackpot of $300 million.He can receive it over the next 30 years in annual payments of $10 million,or he can receive a lump sum of $100 million immediately.Assuming that taxes are not a consideration,should Clint take his winnings as a lump sum?

Question

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Taking the lump sum would be the best choice only if Clint can invest in financial assets that will yield greater returns than the interest rate implicit in the annual payments. This is because a lump sum payment of $100 million today is worth more than $10 million paid over 30 years due to the time value of money. Therefore, if Clint can invest the $100 million in a way that generates a higher rate of return than the interest rate implicit in the annual payments, he should take the lump sum payment.

Suppose That Clint Wins the Lottery Jackpot of $300 Million