You Have a Choice Between a Lottery Lump Sum Payout

question 83

Multiple Choice

You have a choice between a lottery lump sum payout of $10,000,000 today or a series of thirty annual annuity payments (first payment one year from today) .At a discount rate of 7.50%,how large must the annual annuity payments be to make you indifferent between the two choices?

• A)$819,814.81
• B)$833,102.77
• C)$846,712.36
• D)$400,000.00

---

Definitions:

Net Cash

The total amount of cash and cash equivalents a company possesses after deducting all liabilities.

Free Cash Flow

This represents the amount of cash a company generates from its operations after accounting for capital expenditures, showing the liquidity available for expansion, dividends, or debt repayment.

Capital Expenditures

Expenses incurred by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment, often to improve or maintain their long-term capacity and efficiency.

Net Cash

The amount of cash available after accounting for cash inflows minus cash outflows, reflecting a company's ability to meet its short-term obligations.