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andreyandreev [35.5K]
3 years ago
13

You have just won the lottery and will receive $530,000 in one year. You will receive payments for 25 years, and the payments wi

ll increase 4 percent per year. If the appropriate discount rate is 10 percent, what is the present value of your winnings
Business
1 answer:
polet [3.4K]3 years ago
7 0

Answer:

Present value= $3,642,651.54

Explanation:

Giving the following information:

You have just won the lottery and will receive $530,000 in one year. You will receive payments for 25 years, and the payments will increase by 4 percent per year. The appropriate discount rate is 10 percent.

First, we need to calculate the final value using the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual payment= 530,000

i= 0.04 + 0.10= 0.14

n= 25

FV= {530,000*[(1.14^25)-1]}/0.14

FV= 96,391,538.43

Now, we can calculate the present value:

PV= FV/(1+i)^n

PV= 96,391,538.43/ (1.14^25)

PV= $3,642,651.54

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Eddie was surprised to learn that not everyone would receive a bonus this year instead management plan to
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Eddie's company is using a forced ranking performance review system.

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The correct question is given below:
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Valley spa purchased $7,800 in plumbing components from tubman co. valley spa signed a 60-day, 10% promissory note for $7,800. i
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The journal entry is given as follows;

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Accounts Receivable-Valley Spa           Dr.$7,930

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If you put up $43,000 today in exchange for a 6.25 percent, 15-year annuity, what will the annual cash flow be?
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