You have just won the Powerball Lottery with a jackpot of $329,000,000. No one else had the winning ticket so it's all yours! You remember taxes in your finance class and know that if you take a lump sum, it will cost you almost $122 million dollars. So, you elect to take the 25-year payout. Your winnings will be paid to you in 25 equal annual installments with the first payment made at the end of the year. If you feel the appropriate annual discount rate is 9%, what is the value to you of the $13,160,000 annual cash flow after 5 years into the payout?

You have just won the Powerball Lottery with a jackpot of $329,000,000. No one else had the winning ticket so it's all yours! You remember taxes in your finance class and know that if you take a lump sum, it will cost you almost $122 million dollars. So, you elect to take the 25-year payout. Your winnings will be paid to you in 25 equal annual installments with the first payment made at the end of the year. If you feel the appropriate annual discount rate is 9%, what is the value to you of the $13,160,000 annual cash flow after 5 years into the payout?

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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Similar questions

You currently have $12,000 saved up in your bank account. You believe that 2 years from now, some of your generous relatives will give you a combined gift of $5,000 as a college graduation present. If you can earn 4.5% annual compound interest on your savings, how many years will it take you, from today, to be able to afford the car you'd like to purchase, which costs $25,000?
Joe Pierce has been offered the opportunity of investing $178,556.90 now. The investment will earn 8% per year and at the end of its life will return $500,000 to Joe. How many years must Joe wait to receive the $500,000?
Your eccentric (and rich uncle) is thrilled that you are pursuing your undergraduate in business administration. For the next 40 years (starting 1 year from now; last payment 40 years from now), he will pay you $2000 every odd year (1st, 3rd, etc.) and $3000 every even year (2nd, 4th, etc.). The relevant discount rate is 5% per year. What is the present value of all the money you will receive from this source over the next 40 years?
You purchased a house for 850,000 cash 4 years ago. You can sell it today for 980,000. What rate of return did you earn on this investement? Round your answer to the nearest tenth of a percent.
You have 30 years left until retirement and want to retire with $2.6 million. Your salary is paid annually, and you will receive $76,000 at the end of the current year. Your salary will increase at 3 percent per year, and you can earn a return of 9 percent on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Perentage of Salary:______________
Suppose you're fresh out of college and have a new job where you're able, by being frugal, to put aside $400 from each monthly paycheck for 2 years to invest in a fund that pays you 6% interest, compounded monthly. By the end of two years you would have put $9600 total into that fund, and it would be worth $10,223.65 at that point. Not bad. You've made over $600! But by then there are other constraints on your monthly paycheck and you can't continue your good habit. However, you leave that $10,223.65 invested in the fund that pays 6% compounded monthly. How much is that investment worth when you go back to claim it when you retire, exactly 46 years later? Round your answer to the nearest dollar,
Ellen won a lottery that will pay her $100,000 a year for 20 years, or she can accept $1,500,000 today. A)Assuming she can earn 2.5% and maximizing her winnings is the only consideration, which offer should she accept? Show your calculations. B)Assuming she can earn 3%, what would be the lump sum today equivalent to the 20 payments of $100,000?
Your dreams of becoming rich have just come true. You have won the State of Tranquility's Lottery. The State offers you two payment plans for the$4,000,000 advertised jackpot. You can take annual payments of $160,000 at the end of the year for the next 25 years or $1,864,573 today. b. If your investment rate over the next 25 years is 6%, what is the present value of the $160,000 annual payments today?
JAX, Inc. has been offered the opportunity of investing $128,729 now. The investment will earn 8% per year and at the end of its life will return $600,000 to JAX.. How many years must JAX wait to receive the $600,000?
the lottery commission wants to be able to withdraw $400,000 at the beginning of each year for twenty years to cover annual payments due to Randy who won 8 million. How much does the commission need to invest today in an account paying 3.6% compounded annually to provide these payments?
You like to buy lottery tickets every week. The lottery pays an insurancecompany that pays the winner an annuity. If you win a $60,000,000 lotteryand elect to take an annuity, you get $3,000,000 per year at the beginningof each year for the next 20 years.a. How much must the state pay the insurance company if money can earn3 percent?b. How much interest is earned on this lump-sum payment over the 20 years?c. If you take the cash rather than the annuity, the state pays you $30,000,000in one lump sum today. You must pay 40 percent of this in taxes. If you arecurrently working and invest this money at 6 percent, how much moneywill you have in a mutual fund at the end of 20 years?d. Are you better off with the annuity, or should you take the cash? Explain.

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