Answered: You have just won a $1 million lottery.…

You have just won a $1 million lottery. This new lottery, however, will pay out the award 60 years from today. What is the present value of your award based on a 16% p.a. interest rate?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 9EB: If you invest $15,000 today, how much will you have in (for further instructions on future value in...

See similar textbooks

Related questions

Q: A property will provide $24,400 at the end of each year forever. If its value is $245,000, what must…

A: Annual Cash Flow = $24,400Perpetuity Value (Property Value) = $245,000

Q: Assume that Social Security promises you $32,000 per year starting when you retire 45 years from…

A: Information Provided: Annual payment = $32,000 Discount rate = 4% No. of payments till retirement =…

Q: You want to buy a piece of land and the owner would sell it to you for $20,000 cash. Alternatively,…

A: A study that proves that the future worth of the money is lower than its current value due to…

Q: You have just received a windfall from an investment you made in a friend's business. She will be…

A: The Present Value refers to a concept that states the discounted value or say value at today's time…

Q: Your investment advisor wants you to purchase an annuity that will pay you $81,491 after 10 years.…

A: The present value of an annuity refers to the value of the future payments on the current date…

Q: Suppose that you won $1,500,000 in the Illinois state lottery. It will be paid to you over 20 years…

A: An annuity is end of year equal payments made for a fixed period of time at a specified interest…

Q: You have the opportunity to buy a perpetuity that pays $1,000 annually. Your required rate of return…

A: Payments each year = Cash flow = C = $1000 Rate of Interest = r = 13.2% = 0.132

Q: what is the value of your retirement plan after the 50 years? (Do not 3 decimal places)

A: The future value can be compared to the projected how much money you will have in the future from…

Q: You have just won the lottery and will receive $550,000 in one year. You will receive payments for…

A: Receipt in year 1 = $ 550,000 Annual growth rate = 3% Discount rate = 10%

Q: What is the value today of receiving $2,506.00 per year forever? Assume the first payment is made…

A: Present value refers to the discounted value of the future cash flows at the discounting rate for…

Q: You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that…

A: Payment Today = p0 = $1 millionNumber of Payment = 10Year 1 Payment = p1 = $1.51 millionYear 2…

Q: If you were to invest $50,000 from you lottery winnings today, how much will it be worth in 20 years…

A: To find the future value after some specific some time can be found out by the formula of future…

Q: If $476 invested today yields $500 in one year's time, what is the discount rate?

A: If $476 invested today yields $500 in one year's time, the discount rate can be calculated using…

Q: Suppose you just won the state lottery, and you have a choice between receiving $4,500,000 today or…

A: Given, Two options First option Single payment recieve today =$4500000 Second option Annual…

Q: You are offered $90000 today or $380000 in 10 years. Assuming that you can earn 15 percent on your…

A: Step 1: Given that, which one should you choose for the offer value today = $90000 or Present value…

Q: You are interested in buying a piece of real estate property that could be worth $490,000 in four…

A: Present Value refers to a concept that states the discounted value or say value at today's time of…

Q: You deposit $10000 into a CD with 5% interest compounded monthly. The CD will last 10 years. When…

A: Future value of the deposit refers to the compounded value of the amount deposited for the specified…

Q: The Clearinghouse Sweepstakes has just informed you that you have won $1 million. The amount is to…

A: Present ValuePresent value is a fundamental concept in finance that refers to the current worth of a…

Q: Suppose that you expect to receive an inheritance of £10,000 in one year. You will want to put this…

A: A Forward Rate Agreement (FRA) is a financial derivative that enables parties to lock in a…

Q: Your insurance company offered you an annuity that pays you $100 at the end of each year. The life…

A: PV computes the existing value of future benefits by discounting future cash flows with a given…

Q: You have been told that you need $15,000 today in order to have $50,000 you want when you retire 30…

A: To open the "RATE function" window - MS-Excel --> Formulas --> Financials --> RATE.

Q: A lottery jackpot of one million is paid out $25,000 a year for 40 years. At a 10 percent required…

A: Using excel PV function to calculate Present value of annuity due

Q: What's the future value of a 12%, 5-year ordinary annuity that pays $700 each year? If this was an…

A: Given information: Annual payment is $700 Interest rate is 12% Number of years is 5

Q: 2. If you decided to save the entire $20,000 from your lottery payment each year for the next 20…

A: Future Value: It represents the expected value of the present sum of the amount. It is estimated by…

Q: (Present value of a growing perpetuity) As a result of winning the Gates Energy Innovation Award,…

A: First Payment = p1 = $30,000Growth rate = g = 7%Interest rate = r = 12%Time = Forever

Q: You have just won a lottery that promises an annual payment of $130,000 beginning immediately. You…

A: The concept of money's time value expresses that any sum of money is worth more today than it will…

Q: You just won the lottery. You and your heirs will receive $40,000 per year forever, beginning 10…

A: PV today, of a perpetuity starting a year from now is given by = P / r where P = perptuity amount…

Q: You have just won the lottery and will receive $520,000 in one year. You will receive payments for…

A: Present Value (PV) is a financial concept used to determine the current worth of future cash flows,…

Q: It is the end of 2023. You (foolishly) played the lottery and won the following cash flows, to be…

A: Present value is calculated by following formula:-PV= wherePV = present valueA = future valuer=…

Q: You just won a special lottery which will entitle you to an annual payment $45000 for 10 years, but…

A: In this we have to calculate future value FACTOR and future value.

Q: If you put up $41,000 today in exchange for a 5.1 percent, 15-year annuity, what will the annual…

A: Given,Exchange rate (rate) = 5.1%Time Period (nper) = 15 Years (Annuity)Initial Outflow (pv) =…

Q: As part of your retirement plan, you have decided to deposit $9,000 at the beginning of each year…

Q: Suppose you are going to invest $11,000 per year for six years. The appropriate interest rate is 9…

A: Annuity refers to a series of regular payments being made for a defined period. When the payments…

Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

You have just won a $1 million lottery.
This new lottery, however, will pay out
the award 60 years from today. What
is the present value of your award
based on a 16% p.a. interest rate?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction to Question :

VIEW

Step 2: Calculation of Present Value of award:

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

You have just received notification that you have won the $1.5 million first prize in the Centennial Lottery. However, the prize will be awarded on you 100th birthday assuming you're around the collect, 63 a years from now. What is the present value of your windfall if the appropriate discount rate is 8 percent?
You have just received notification that you have won the $1 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday, 70 years from now. What is the present value of your windfall if the appropriate discount rate is 6.45 percent?
The prize in last week’s lottery was estimated to be worth $90 million. If you were lucky enough to win, the payment will be $3.6 million per year over the next 25 years. Assume that the first installment is received immediately. If interest rates are 6%, what is the present value of the prize? If interest rates are 6%, what is the future value after 25 years? How would your answers change if the payments were received at the end of each year? How would your answers change if the interest rate was higher?
A lottery offers you a choice of $1,000,000 per year for 30 years or a lump-sum payment. What lump-sum payment (rounded to the nearest dollar) would equal the annual payments if the current interest rate is 1.9% compounded annually? (a) State the type. A. amortization B. present value of an ordinary annuity C. future value of an ordinary annuity D.sinking fund E. none of these (b) Answer the question. (Round your answer to the nearest dollar.)
The $45 million lottery prize that you have just won actually pays out $4.5 million a year for 20 years. The interest rate is 12.0%. a. If the first payment comes after 1 year, what is the present value of your winnings? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. b. What is the present value if the first payment comes immediately? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. a. Present value b. Present value milion milion
You just won a $625,000 lottery prize! You will receive $25,000 per year for the next 25 years, starting today, a total of $625,000. If the current interest rate is 1.9% compounded annually, what is the cash value of this prize?
You have just received notification that you have won the $1.25 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday, 79 years from now. The appropriate discount rate is 6.4 percent. What is the present value of your winnings?
How much would you accept in a lump sum today, in place of a lottery payment of $35,000 at the end of the next 20 years ($700,000 in total), assuming you could invest it at a 6 percent rate?
You have just won the lottery and will receive $1,000,000 in one year. You will receive payments for 35 years and the payments will increase by 4 percent per year. If the appropriate discount rate is 8 percent, what is the present value of (Do not round intermediate calculations and round your answer to 2 decimal places, 32.16.) your winnings? e.g., Present value
You have won the lottery! The lottery officials have given you a choice between receiving (A) $15,000,000 today, or (B) $1,000,000 at the end of each of the next 20 years. Assuming a market interest rate of 4% (compounded annually), which option is worth more to you today, and by how much?
A lottery winner will receive $1 million at the end of each of the next ten years. What is the future value (FV) of her winnings at the time of her final payment, given that the interest rate is 8.5% per year? A. $14.84 million B. $19.95 million C. $18.95 million D. $13.84 million
Assume you won a worldwide lottery that pays $1.55 million in year 0, $5 million in year 1, and $200,000 in years 5 through 100. Assuming that 100 years is as “long” as infinity, calculate the perpetual equivalent annual worth for years 1 through infinity at an interest rate of 10% per year. (Enter your answer in dollars and not in millions.) The perpetual equivalent annual worth for years 1 through infinity is $ .