Peter Smith Has Just Won the State Lottery and Has

question 116

Multiple Choice

Peter Smith has just won the state lottery and has the following three payout options for after-tax prize money: 1.$50,000 per year at the end of each of the next six years
2) $300,000 (lump sum) now
3) $510,000 (lump sum) six years from now
The annual discount rate is 9%.Compute the present value of the third option.(Round to nearest whole dollar.)
Present value of $1:
$$\begin{array} { | l | r | r | r | } \hline & 8 \% & 9 \% & 10 \% \\\hline 1 & 0.926 & 0.917 & 0.909 \\\hline 2 & 0.857 & 0.842 & 0.826 \\\hline 3 & 0.794 & 0.772 & 0.751 \\\hline 4 & 0.735 & 0.708 & 0.683 \\\hline 5 & 0.681 & 0.650 & 0.621 \\\hline 6 & 0.630 & 0.596 & 0.564 \\\hline 7 & 0.583 & 0.547 & 0.513 \\\hline\end{array}$$

• A) $250,000
• B) $76,667
• C) $79,467
• D) $303,960

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