1) You have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.
Calculate the value of Cash Flow Option 1:
The perpetuity for $800 yearly.
2) You have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.
Calculate the value of Cash Flow Option 2:
$1500 per year for 11 years
3) You have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.
Calculate the value of Cash Flow Option 3:
$1100 per year for 16 years with the first payment occuring today.
4) You have won the lottery and have the choice of the three cash flows each with a 7% rate of interest.
With your rate of return at 7%, which of the three Cash Flow Options would you choose and why?