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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Definitions:

Directors

Individuals elected by shareholders to oversee the management of a corporation and make major decisions.

Election

The formal process of selecting a candidate for office or deciding on a policy issue, typically through the casting of ballots.

Duty of Obedience

The obligation of board members and officers of an organization to follow the organization’s governing statutes and goals, acting within the scope of their authority.

Officers

Individuals appointed or elected to manage and direct the affairs of an organization, typically within corporations, armed forces, or governmental bodies.