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The state lottery's million-dollar payout provides for $1 million(s) to be paid ove 24 years in 25 payments of $40,000. The first $40,000 payment is made immediately and the 24 remaining

The state lottery's million-dollar payout provides for $1 million(s) to be paid ove 24 years in 25 payments of $40,000. The first $40,000 payment is made immediately and the 24 remaining

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The state lottery's million-dollar payout provides for $1 million(s) to be paid over 24 years in 25 payments of $40,000. The first $40,000 payment is made immediately, and the 24 remaining $40,000 payments occur at the end of each of the next 24 years. If 8 percent is the appropriate discount rate, what is the present value of this stream of cash flows? If 16 percent is the appropriate discount rate, what is the present value of the cash flows?
Transcribed Image Text:The state lottery's million-dollar payout provides for $1 million(s) to be paid over 24 years in 25 payments of $40,000. The first $40,000 payment is made immediately, and the 24 remaining $40,000 payments occur at the end of each of the next 24 years. If 8 percent is the appropriate discount rate, what is the present value of this stream of cash flows? If 16 percent is the appropriate discount rate, what is the present value of the cash flows?
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