Suppose you win the lottery and you're thinking about whether to take the lump sum or be paid the annuity over time, so you need to first figure out the present value of theannuity. What is the value of a growing annuity due (i.e., you get some money immediately at t=0) that pays you $8 million now, and you then receive 29 more payments (i.e., 30payments in total) where each payment is 3% larger than the last. Assume the discount rate is 7%. Answer in MILLIONS of dollars without the dollar sign and two decimal place(e.g., "28.23" is $28.23 million).Type your answer...

First payment: $8 million (immediate payment at t=0)Discount rate: 7%Number of payments: 30Growth…

Answered: Suppose you win the lottery and you're…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5MC: If you are saving the same amount each month in order to buy a new sports car when the new models...

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Suppose you are going to receive $13,500 per year for five years. The interest rate is 8.4%a. What is the present value of the payments if they are in the form of an ordinary annuity? What is the present value if the payments are an annuity due?b. Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? What if the payments are annuity due?c. Which has the highest present value (future value), the ordinary annuity or annuity due?
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Suppose you're going to receive $7800 per year for five years. the appropriate discount rate is 7.5%. A.What is the present value of the payments if they are in the form of an ordinary annuity? What is the present value if the payments are an annuity due? B. Suppose you plan to invest the payments for five years. What is the future value if the payments are an ordinary annuity? What if the payments are in annuity due? C. Which has the higher present value, the ordinary annuity or the annuity due? Which has a higher future value? Will this always be true?
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