For a financial advisor?
If a character be to win a $30 million lottery (or settlement, etc) and own the pick to help yourself to a $15 million lump settlement or $1 million per year for 30 years, which is better?
What is the appropriate discount rate to use when figure the Net Present Value of the $1 million annual bread flow?
Is at hand some sort of indifference point between the two?
(Unfortunately this is hypothetical)
Answers:
If you assume that you will be capable of invest the money at a 10% annual return, you will at the ending of the 30 years enjoy $164M near choice #2. If you pick alternative #1, you will own $240M.
To convert to present merit, I would discount that adjectives appeal by expected inflation rates, you can use 3%.
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What is the appropriate discount rate to use when figure the Net Present Value of the $1 million annual bread flow?
Is at hand some sort of indifference point between the two?
(Unfortunately this is hypothetical)
Answers:
If you assume that you will be capable of invest the money at a 10% annual return, you will at the ending of the 30 years enjoy $164M near choice #2. If you pick alternative #1, you will own $240M.
To convert to present merit, I would discount that adjectives appeal by expected inflation rates, you can use 3%.