Question

A lottery winner can take $6million now or be paid $600,000 at the end of each year for the next 16 years. The winner calculates the internal rate of return of taking the money at the end of each year, and estimating that the discount rate across this period will be 5%, decides to take the money at the end of each year. Was her decision correct

Answer 1

yes

the present value of the 16 year annuity is 6502661.74. this is greater than $6 million

Step-by-step explanation: