Sweepstakes Express recently announced a $10 million sweepstakes. Assume that the winner will receive $400,000 for 19 years plus a final payment of $2,400,000 in the 20th year. Required a. What part...

Sweepstakes Express recently announced a $10 million sweepstakes. Assume that the winner will receive $400,000 for 19 years plus a final payment of $2,400,000 in the 20th year.

Required

a. What part of this payout is an annuity?

b. What is the present value of the entire sweepstakes payout at a discount rate of 8%?

c. If the appropriate discount rate is 14%, how much is the payout worth today?

d. If you had a choice between this payout schedule and a single payment of $5 million today, which would you prefer, assuming that you could invest the funds at 6%?

e. What other factors might influence your decision to take an immediate payout versus a 20-year payout?