Supposing cost of money is 4 determine the value of this, Ask an Expert

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1) Jack now discovered that he holds winning ticket for $87 million mega lottery in Missouri. Now he requires making a decision which alternative to select: (i) $44 million lump sum payment today. Or (ii) payment of $2.9 million per 30 years; first payment will be made today. If Jack’s opportunity cost is 3%, which alternative must he select.

2) A wealthy philanthropist has established given endowment for the hospital. Details are given: a cash deposit of= $7 M one year from now; annual cash deposit of= $2 M per year for next 5 years. The first= $2 million will start today; at the end of the five years, hospital will also receive the lump sum payment of $16 M. Supposing cost of money is 4%, determine the value of this endowment in today’s dollars? Illustrate your work.

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