In: Finance
Create a new workbook in Excel. Please include an input area and an answer area for each problem. You will have an answer for each bullet point. Formatting is up to you. Just make sure it is easy to tell where your answers are, and what equation you used in excel to get the answer.
5. Assume you have won the lottery and have the choice of (1) receiving $1,000,000 now or (2) receiving $120,000 each year for 20 years.
• Opportunity cost of capital is 10 percent; what is the future value of the first option?
• Opportunity cost of capital is 10 percent; what is the future value of the second option?
• Which is the better option? • Opportunity cost of capital is 8 percent; what is the future value of the first option?
• Opportunity cost of capital is 8 percent; what is the future value of the second option?
• Which is the better option?
Part A:
Since, Future Value of Option II > Future Value of Option I, second option is better
Part B:
Since, Future Value of Option II > Future Value of Option I, second option is better