Exercise 14A-6 (Algo) Basic Present Value Concepts [LO14-7]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 $1.34 million. The State Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $67,000 each.Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.Required:1. If Mr. Ormsby can invest money at a 9% rate of return, what is the present value of his winnings? (Enter your answer in dollars and not in millions of dollars.) Exercise 14A-6 (Algo) Basic Present Value Concepts [LO14-7]The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state's newest millionaire. By choosingthe six winning numbers on last week's state lottery, Mr. Ormsby won the week's grand prize totaling $1.34 million. The State LotteryCommission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $67,000 each.Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.Required:1. If Mr. Ormsby can invest money at a 9% rate of return, what is the present value of his winnings? (Enter your answer in dollars andnot in millions of dollars.)Present value

Given data, Total money in week's grand prize=$1.34 million Number of installments=20 Amount per installment =$67,000 Rate of return =9% Present value of future cash flows = Annuity * Present value annuity factor (rate,time)Present value of winnings= $67,000 * Present value annuity factory (9%,20) = $67,000 * 9.1285 = $611,610(rounded off) Hence, Present value of winnings =$611,610

Answered: The Caldwell Herald newspaper reported…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Exercise 14A-6 (Algo) Basic Present Value Concepts [LO14-7]

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 $1.34 million. The State Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $67,000 each.

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. If Mr. Ormsby can invest money at a 9% rate of return, what is the present value of his winnings? (Enter your answer in dollars and not in millions of dollars.)

Exercise 14A-6 (Algo) Basic Present Value Concepts [LO14-7]
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 $1.34 million. The State Lottery
Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $67,000 each.
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.
Required:
1. If Mr. Ormsby can invest money at a 9% rate of return, what is the present value of his winnings? (Enter your answer in dollars and
not in millions of dollars.)
Present value

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