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1) Michael just found out that he holds winning ticket for $87 million mega lottery in Missouri. Now he requires deciding which alternative to select: (a) $44 million lump sum payment today. Or (b) payment of= $2.9 million per 30 years; 1st payment will be made today. If Michael’s opportunity cost is 3%, which alternative must he select?

2) Wealthy philanthropist has established the given endowment for the hospital. Details are given: a cash deposit of= $7 M one year from now; the annual cash deposit of= $2 M per year for next 5years. 1st $2 million will start today; at the ending of the five years, hospital will also get a lump sum payment of= $16 M. Supposing cost of money is= 4%, find out the value of this endowment in today’s dollars? illustrate your work.

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Category:- Basic Finance
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