Your Plans for the Future Have Finally Materialized Because You

question 67

Essay

Your plans for the future have finally materialized because you have won the lottery.Congratulations! The lottery marketing material says you have won $20,000,000 but a more careful examination of the terms and conditions means that you have won twenty $1,000,000 beginning-of-the-year cash flows with the first cash flow today.Further,the lottery contract says that instead of waiting for so many years to collect your winnings,you could accept a lump sum check today in the amount of $12,000,000.If you determine that the appropriate interest rate to compare these two alternatives is 6%,which alternative is preferred? To answer this question,solve for the present value of each alternative and make your decision based strictly on the values.You may ignore taxes in your decision

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Definitions:

Indwelling Urinary Catheter

An indwelling urinary catheter is a tube inserted into the bladder through the urethra to drain urine, often used for patients who cannot urinate independently.

Colostomy

A surgical procedure that creates an opening in the abdominal wall to allow for waste elimination through the colon to an external pouch.

Nasoenteric Feeding Tube

A type of feeding tube that is inserted through the nose and extends into the intestines to deliver nutrition directly to the gastrointestinal tract.

Computed Tomography

A diagnostic imaging technique that uses computer-processed combinations of X-ray measurements taken from different angles to create cross-sectional images.