Felice Lucas has just won the state lottery and has the following three payout options for after-tax prize money: 1. $170,000 per year at the end of each of the next six years 2. $312,000 (lump sum) now 3. $508,000 (lump sum) six years from now The annual discount rate is 9%. Compute the present value of the first option. (Round your answer to the nearest whole dollar.) Present value of an ordinary annuity of $1: 8% 9% 10% 1 0.926 0.917 0.909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 4 3.312 3.240 3.170 5 3.993 3.890 3.791 6 4.623 4.486 4.355 7 5.206 5.033 4.868 Present value of $1: 8% 9% 10% 1 0.926 0.917 0.909 2 0.857 0.842 0.826 3 0.794 0.772 0.751 4 0.735 0.708 0.683 5 0.681 0.650 0.621 6 0.630 0.596 0.564 7 0.583 0.547 0.513 A.$457,251 B.$850,000 C.$482,000 D.$762,620
Felice Lucas has just won the state lottery and has the following three payout options for after-tax prize money: 1. $170,000 per year at the end of each of the next six years 2. $312,000 (lump sum) now 3. $508,000 (lump sum) six years from now The annual discount rate is 9%. Compute the present value of the first option. (Round your answer to the nearest whole dollar.) Present value of an ordinary annuity of $1: 8% 9% 10% 1 0.926 0.917 0.909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 4 3.312 3.240 3.170 5 3.993 3.890 3.791 6 4.623 4.486 4.355 7 5.206 5.033 4.868 Present value of $1: 8% 9% 10% 1 0.926 0.917 0.909 2 0.857 0.842 0.826 3 0.794 0.772 0.751 4 0.735 0.708 0.683 5 0.681 0.650 0.621 6 0.630 0.596 0.564 7 0.583 0.547 0.513 A.$457,251 B.$850,000 C.$482,000 D.$762,620
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
Felice Lucas has just won the state lottery and has the following three payout options for after-tax prize money:
|
1.
|
$170,000 per year at the end of each of the next six years
|
|
2.
|
$312,000 (lump sum) now
|
|
3.
|
$508,000 (lump sum) six years from now
|
The annual discount rate is 9%. Compute the present value of the first option. (Round your answer to the nearest whole dollar.)
Present value of an ordinary annuity of $1:
|
|
8%
|
9%
|
10%
|
|
1
|
0.926
|
0.917
|
0.909
|
|
2
|
1.783
|
1.759
|
1.736
|
|
3
|
2.577
|
2.531
|
2.487
|
|
4
|
3.312
|
3.240
|
3.170
|
|
5
|
3.993
|
3.890
|
3.791
|
|
6
|
4.623
|
4.486
|
4.355
|
|
7
|
5.206
|
5.033
|
4.868
|
Present value of $1:
|
|
8%
|
9%
|
10%
|
|
1
|
0.926
|
0.917
|
0.909
|
|
2
|
0.857
|
0.842
|
0.826
|
|
3
|
0.794
|
0.772
|
0.751
|
|
4
|
0.735
|
0.708
|
0.683
|
|
5
|
0.681
|
0.650
|
0.621
|
|
6
|
0.630
|
0.596
|
0.564
|
|
7
|
0.583
|
0.547
|
0.513
|
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