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Congrats! You just won a lottery and are offered two options:

Subject Category
Corporate Finance

Question Details

Congrats! You just won a lottery and are offered two options:

Option 1: $100,000 per year forever beginning today

Option 2: $1M today

a) Which option has a higher present value if your opportunity cost of capital is 8%?

b) What is the interest rate that would make the two options break-even?

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