John Doe Wins the Lottery and May Pick from the Following

question 14

Multiple Choice

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

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Definitions:

Technological Advances

Progressive developments and innovations in technology that enhance efficiency, capabilities, and various aspects of life.

Ranching

The business of raising livestock, such as cattle or sheep, on large tracts of land.

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The process or industry of extracting minerals, coal, or other geological materials from the earth, typically from an ore body, lode, vein, seam, or reef.

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