John Wins the Lottery and Has the Following Three Payout

question 89

Multiple Choice

John wins the lottery and has the following three payout options for after-tax prize money: 1. $150,000 per year at the end of each of the next six years
2. $300,000 (lump sum) now
3. $500,000 (lump sum) six years from now
The required rate of return is 9%. What is the present value if he selects the second option? Round to nearest whole dollar.
Present value of $1:

• A)$650,000
• B)$100,000
• C)$400,000
• D)$300,000

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