You just won $20,000,000 in the power ball of the Texas lottery. They lottery commission has asked you to chose between the following two options for your payout. Get paid $4,000,000 today and 4,000,000 per year at the end of the next four years, or take $16,000,000 today.
a. If your investment opportunity cost is 12%, which alternative would you chose?
b. What about if your investment opportunity cost were 15%?