You've Just Won $1 Million Dollars in a Lottery

question 79

Multiple Choice

You've just won $1 million dollars in a lottery.For your prize,you may except a $1 million lump sum paid immediately,a constant perpetuity of $80,000 per year (with the first payment arriving in one year) ,or a stream of cash flows that starts at $45,000 next year and grows at 3.5% per year in perpetuity.If the interest rate is 8%,which of these choices has a higher present value?

• A) a $1 million lump sum
• B) a constant stream of $80,000 per year in perpetuity
• C) a stream that begins at $45,000 and grows at 3.5% in perpetuity
• D) all three choices have the same present value

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Definitions:

Technological Determinism

The theory that society's technology drives the development of its social structures and cultural values.

Human Values

The principles, standards, or qualities considered worthwhile or desirable in individuals or societies, encompassing moral, ethical, and social virtues.

Social Construction

The concept that aspects of society, such as norms, values, and beliefs, are created and maintained through social interactions and agreements.

Environmental Problems

Issues affecting the natural environment, such as pollution, deforestation, and climate change, that require management or mitigation.