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Calculate net present value of cash prize
Question Description
Class, I'm sure many of you remember the Publisher's Clearing House
sweepstakes - like me, some of you may even have been a finalist for the
super prize of $10 million. :-) If you did win this prize, you would
not actually receive a check for $10 million. Instead, you would receive
$500,000 per year for 20 years. Imagine that you actually were the
lucky winner. From a purely financial standpoint, would you be willing
to accept $8 million today rather than $500,000 per year for the next 20
years? Why or why not? What non-financial factors might also be
considered?
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