You hear a knock on your door. You look out and see a group of people
and TV cameras. You wonder what is going on so you open the door. As you open the door you have a microphone and TV camera shoved in your face and you hear those words. " Congratulations, you are the lucky winner of the Publishers Clearing House $10,000 a week for life sweepstakes grand prize." You look stunned and then excited and don't know what to say, but you manage to say something intelligent and then the cameras are turned off. Now they start informing you of the details of the prize you have just won.
They tell you that you have the option of receiving $10,000 per week for the rest of your life, OR, you can take a $10,000,000 lump sum payment immediately. What is your choice? You ask if you can have a little time to make the decision and get back to them. They say you can have until the end of the day to make your decision. As a financial manager you know that you can put the knowledge learned from your finance class to good use to make the correct decision.
For this problem I would like you to explain the process you would use to make your choice. You will need to use TVM calculations learned in class, along with other information. You will need to come up with some of the variables for the calculations on your own. I will be looking for how you arrived at those numbers and information to see if they are reasonable assumptions. Please provide me with your calculations for each option along with an explanation of how you arrived at the numbers and if there are any other deciding factors that may influence your decision. Finally, tell me which option you would choose.
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