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tresset_1 [31]
3 years ago
5

Assume that you just won $35 million in the Florida lottery, and hence the state will pay you 20 annual payments of $1.75 millio

n each beginning immediately. If the similar risk to the lottery earnings (e.g., the rate on 20-year U.S. Treasury bonds) is 6 percent, what is the present value of your winnings
Business
1 answer:
Rus_ich [418]3 years ago
7 0

Answer:

$21.277 million

Explanation:

Data provided in the question:

Amount of lottery won = $35 million

Number of annual payments = 20

Amount of annual payment = $1.75 million

Interest rate = 6%

Now,

Present value of the payment = Payment × Present value factor

Also,

Present value factor = [1 + r]⁻ⁿ

Since the payment started immediately

Therefore,

Base year i.e n = 0

Thus,

we have

Year (n)         Annual payment              Present value

   0                    $1.75 million                   $1.75 million

   1                    $1.75 million                   $ 1.650943 million

   2                    $1.75 million                   $1.557494 million

   3                    $1.75 million                   $1.469334 million

   4                    $1.75 million                   $1.386164 million

   5                    $1.75 million                   $1.307702 million

   6                    $1.75 million                   $1.233681 million

   7                    $1.75 million                   $1.16385 million

   8                    $1.75 million                   $1.097972 million

   9                    $1.75 million                   $1.035822 million

   10                    $1.75 million                   $0.977191 million

   11                    $1.75 million                   $0.921878 million

   12                    $1.75 million                   $0.869696 million

   13                    $1.75 million                   $0.820468 million

   14                    $1.75 million                   $0.774027 million

   15                    $1.75 million                   $0.730214 million

   16                    $1.75 million                   $0.688881 million

   17                    $1.75 million                   $0.649888 million

   18                    $1.75 million                   $0.613102 million

   19                    $1.75 million                   $0.578398 million

Hence,

The present value of the  winnings = ∑ Present value of payments

= $21.277 million

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Distinguish between the direct and indirect strategies. when is each appropriate.
natali 33 [55]

Answer: Depends on Content and Audience.

Explanation:

Deciding which strategy to use depends on the content of the work to be presented or the audience being presented to.

If the content is positive or if the audience are Positive or neutral about the work to be presented, the Direct Strategy is preferable. This refers to stating the conclusion or main idea at the beginning of the presentation and then working to explain it.

However, if you deduce that the audience are not positive to the content or that the content is not exactly good news or positive, it would be best to use the Indirect approach. With this approach you start with the evidence and other information then state the conclusion or main idea towards the end. This gives you the opportunity to win the audience over or at least explain why the content is negative before they reach the conclusion.

5 0
3 years ago
Firm L has debt with a market value of $200,000 and a yield of 9%. The firm's equity has a market value of $300,000, its earning
Norma-Jean [14]

Answer:

Firm L's cost of equity is 13.2%

Explanation:

In order to calculate Firm L's cost of equity we would have to calculate the following formula:

Firm L's cost of equity=Unlevered cost of equity+D/E*( Unlevered cost of equity-cost of debt)*(1-tax rate)

D/E = debt/equity

D/E = $200,000/$300,000

D/E=0.6666

Therefore, Firm L's cost of equity= 12%+0.6666*(12%-9%)*(1-0.4)

Firm L's cost of equity=13.2%

Firm L's cost of equity is 13.2%

5 0
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Feldspar, Inc. started the year with 200 units in the Finished Goods Inventory account. It produced 600 units during the year an
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Answer:

A. its operating income for the period will be higher than under absorption costing

Explanation:

As we know that

Under absorption costing, the fixed cost is divided on the number of units produced

And under the variable costing, the fixed cost is considered as a cost selling of goods so the absorption costing method will be lower than the value of finished goods.

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3 0
3 years ago
Find the APR, or stated rate, in each of the following cases (Do not round intermediate calculations and round your final answer
Valentin [98]

Answer:

Stated Rate    No. of Times Compounded     Effective Rate (EAR) %            

   11.85%                    Semiannually                             12.2 %

   12.37%                    Monthly                                      13.1%

   110.27%                    Weekly                                       10.8%

   13.54%                    Infinite                                        14.5%

Explanation:

EAR = ( 1 + ( APR / m )^m)-1

Semiannually

m = 12 / 6 = 2

0.1220 = ( ( 1 + ( APR / 2 ) )^2) - 1

0.1220 + 1 = (1 + ( APR / 2 ) )^2

1.1220 = ( 1 + ( APR / 2 ) )^2

\sqrt{1.1220} = \sqrt{( 1 + ( APR / 2 ))^2}

1.059 = 1 + ( APR / 2 )

1.059 - 1 = APR / 2

0.059 x 2 = APR

APR = 0.1185 = 11.85%

Monthly

m = 12  / 1 = 12

0.1310 = ( ( 1 + ( APR / 12 ) )^12) - 1

0.1310 + 1 = (1 + ( APR / 12 ) )^12

1.1310 = ( 1 + ( APR / 12 ) )^12

APR = 12.37%

Weekly

m = 52

0.1080 = ( ( 1 + ( APR / 52 ) )^52) - 1

0.1080 + 1 = (1 + ( APR / 52 ) )^52

1.1080 = ( 1 + ( APR / 52 ) )^52

APR = 10.27%

Infinite

m = 20,000

0.1450 = ( ( 1 + ( APR / 12 ) )^12) - 1

0.1450 + 1 = (1 + ( APR / 12 ) )^12

1.1450 = ( 1 + ( APR / 20,000 ) )^20,000

APR = 13.54%

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