Question

John won the lottery and has the option to receive a lump sum of $5,000,000 now or receive a $500,000 annuity

every year for the next 25 years. Assuming John can earn a 10% return on his money, what would you advise him to do?

Take the annuity because it is worth $50,840 more than the lump sum

Take the lump sum because it is worth $50,840 more than the annuity

Take the annuity because it is worth $461,480 more than the lump sum

Take the lump sum because it is worth $461,480 more than the annuity

Whatever he wants, both are worth the same.

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