Lucky Louie just won the lottery! He has a choice of taking $1,000,000 in cash or receiving $50,000 per year for 30 years beginning at the end of this year. The best way to make this choice is to
A) consult an economic advisor.
B) consult an oracle.
C) calculate the future value of the annuity payments.
D) calculate the present value of the annuity payments.

Question

Quizplus · Accepted Answer

Calculating the present value of the annuity payments allows Lucky Louie to compare the value of the annuity payments in today's dollars to the $1,000,000 cash option, taking into account the time value of money. This financial analysis helps in making an informed decision.

Lucky Louie Just Won the Lottery! He Has a Choice