1. You’ve won a state lottery and have two choices of how you want your winnings to be paid to you. You can get $2,000,000 today or you can get $22,000 per month, starting next month, for 10 years. If your investments earn 5% APR (compounded monthly) which alternative has a higher present value terms and by how much?
The $2,000,000 is better by $74,190
The $2,000,000 is better by $640,000
None of the choices is correct
The annuity is better by $640,000
The annuity is better by $74,190
2. Which one of these is the best indicator that acquiring a firm is a good idea?
The firm has increasing cash inflows.
The firm has a positive NPV at the riskless rate of return.
The firm has a positive NPV at an appropriate discount rate.
The firm has a negative NPV at all positive discount rates.
The firm is growing on an annual basis.