Peter Smith has just won the state lottery and has the following three payout options for after-tax prize money
1. $64,000 per year at the end of each of the next six years
2. $304,000 (lump sum) now
3. $502,000 (lump sum) six years from now
The annual discount rate is 9%. Compute the present value of the third option. (Round to nearest whole dollar.)
Present value of $1:
8% 9% 10%
1 0.926 0.917 0.909
2 0.857 0.842 0.826
3 0.794 0.772 0.751
4 0.735 0.708 0.683
5 0.681 0.650 0.621
6 0.630 0.596 0.564
7 0.583 0.547 0.513
A) $240,000
B) $98,133
C) $101,717
D) $299,192
D .D)
Present value of the lottery receipt under the third option:
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