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 has won the week's grand prize totaling $1.32 million. The State Lottery Commission has indicated that Mr. Ormsby will receive his prize in 20 annual installments of $66,000 each. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. Required: 1. If Mr. Ormsby can invest money at a 8% rate of return, what is the present value of his winnings? Present Value

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 has won the week's grand prize totaling $1.32 million. The State Lottery Commission has indicated that Mr. Ormsby will receive his prize in 20 annual installments of $66,000 each. Use Excel or a financial calculator to solve. Round answers to the nearest dollar. Required: 1. If Mr. Ormsby can invest money at a 8% rate of return, what is the present value of his winnings? Present Value

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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NEEDS TO BE DONE ON EXCEL You have just been notified that you have won the local Bucks for Life lottery. The lottery rules state that you have the option of receiving $25,000 annually for the rest of your life beginning immediately or a single lump sum today. You are not sure which option to take but to begin with you want to be assured that the lottery has enough money set aside to make the annual payments if you choose that option. Your accountant emails you to let you know that “it appears that the lottery has $200,000 in a separate bank account to cover your annual payment.” Assuming an interest rate of 12%, is this enough cash to cover the annual payments of $25,000 over your lifetime?
I solved the problem, but please put the information you provided in an excel spreadsheet to get the answers I have please and explain the steps/formula used. 1. John won a $45 million lottery today. The payout is the following: John gets $1.5 million today and $1.5 million each year for the next 29 years. How much money worth today for the lottery assuming John’s federal tax rate is 39.6%, state tax is 8.5% and his annual discount rate is 12%? Annual Discount Rate = 12% Annual Income = 1.5 million Annual Federal Tax = 39.6% * 1.5 million = 0.594 million Annual State Tax = 8.5% * 1.5 million = 0.1275 million Annual Net Income = 1.5 million - 0.594 million - 0.1275 million = 0.7785 million Calculate Total Present Value by using the PVOA Formula. Annuity Factor i = 12% ; time = 29 years ; Factor = 8.0218 PVOA = PMT x Annuity Factor = 0.7785 x 8.0218 = 6.244971 million Total PV = Initial Net Income + PVOA = 0.7785 million + 6.244971 million = 7.02 million
I solved the problems, but please put the information you provided in an excel spreadsheet to get the answers I have please. 1. John won a $45 million lottery today. The payout is the following: John gets $1.5 million today and $1.5 million each year for the next 29 years. How much money worth today for the lottery assuming John’s federal tax rate is 39.6%, state tax is 8.5% and his annual discount rate is 12%? Annual Discount Rate = 12% Annual Income = 1.5 million Annual Federal Tax = 39.6% * 1.5 million = 0.594 million Annual State Tax = 8.5% * 1.5 million = 0.1275 million Annual Net Income = 1.5 million - 0.594 million - 0.1275 million = 0.7785 million Calculate Total Present Value by using the PVOA Formula. Annuity Factor i = 12% ; time = 29 years ; Factor = 8.0218 PVOA = PMT x Annuity Factor = 0.7785 x 8.0218 = 6.244971 million Total PV = Initial Net Income + PVOA = 0.7785 million + 6.244971 million = 7.02 million 2. You are offered the opportunity to put some money away for…
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