Question

Dorothy Taylor has won a state lottery and will receive a payment of $93,000 every year, starting today, for the next 20 years. If she invests the proceeds at a rate of 5.76 percent, what is the present value of the cash flows that she will receive? (Round factor values to 4 decimal places, e.g. 1.5212 and final answer to nearest whole dollar, e.g. 5275.)

Answer 1

Answer: The answer is $1,092,865.5426

To the nearest whole dollar, we have:

$1,092,866

Explanation: from the question above, we will be calculating the present value of a cashflow of $93,000 over a period of 20 years, at a rate of 5.76%.

We will be performing a discounting operation.

Refer to the attached files below to see the calculations and how we arrived at the answer above.

Answer 2

Answer: $30,342

Explanation:

Given the following ;

Cash flow per period = $93,000

Rate = 5.76%

Years = 20

Using the formula

pv = (C) ÷ (1 + r) ^n

Where,

pv = present value

C = cash flow at first period =$93,000

r = rate = 5.76% = 0.0576

n = period = 20years

pv = (93,000) ÷ (1 + 0.0576)^20

pv = 93000 ÷ (1.0576)^20

pv = 93000 ÷ 3.0650

pv = $30,342