Basic Present Value Concepts The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state’s newest millionaire. By choosing the six winning numbers on last week’s state lottery, Mr. Ormsby won the week’s grand prize totaling $1.6 million. The Slate Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $80,000 each. Required: 1. If Mr. Ormsby can invest money at a 12% rate of return, what is the present value of his winnings? 2. Is it correct to say that Mr. Ormsby is the “state’s newest millionaire”? Explain your answer.
Basic Present Value Concepts The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state’s newest millionaire. By choosing the six winning numbers on last week’s state lottery, Mr. Ormsby won the week’s grand prize totaling $1.6 million. The Slate Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $80,000 each. Required: 1. If Mr. Ormsby can invest money at a 12% rate of return, what is the present value of his winnings? 2. Is it correct to say that Mr. Ormsby is the “state’s newest millionaire”? Explain your answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Basic Present Value Concepts
The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state’s newest millionaire. By choosing the six winning numbers on last week’s state lottery, Mr. Ormsby won the week’s grand prize totaling $1.6 million. The Slate Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $80,000 each.
Required:
1. If Mr. Ormsby can invest money at a 12%
2. Is it correct to say that Mr. Ormsby is the “state’s newest millionaire”? Explain your answer.
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