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Suppose you win $1 million in a lottery and your winnings are scheduled to be paid as follows: $400000 at the end of one year, $

masha68 [24]

Answer:

The present discounted value of the winnings is $916,531.69.

Explanation:

The present discounted values of each of the payment can be calculated using the present value formula as follows:

PV = FV / (1 + r)^n ...................... (1)

Where;

PV = Present discounted value of payment at the end of specified year(s)

FV = Future value or the scheduled amount

r = interest rate

n = year in which the payment is scheduled to be paid

Using equation (1), we have:

PV of payment at the end of one year = $400000 / (1 + 5%)^1 = $380,952.38

PV of payment at the end of two years = $400000 / (1 + 5%)^2 = $362,811.79

PV of payment at the end of three years = $200000 / (1 + 5%)^3 = $172,767.52

The present discounted value of the winnings can now be calculated as the additions of the 3 PVs above as follows:

PV of the winnings = PV of payment at the end of one year + PV of payment at the end of two years + PV of payment at the end of three years = $380,952.38 + $362,811.79 + $172,767.52 = $916,531.69

Therefore, the present discounted value of the winnings is $916,531.69.

6 0

3 years ago

SSS is a local restaurant serving the needs of college students, faculty, and staff. The manager is considering adding a websit

zepelin [54]

Answer:

B.Web design

Explanation: I took the test

7 0

3 years ago

g Marginal revenue product measures the rev: 06_21_2018 Multiple Choice amount by which the extra production of one more worker

Anton [14]

Answer: The correct answer is the first statement.

Explanation: Marginal revenue product measures the amount by wich the extra production of one more worker increases a firm's total revenue.

<u>It is an economic term used to describe the change in total income that results from a unit change of one type of input variable. There are many types of input variables that you can change, such as adding an employee or a new machine.</u>

5 0

3 years ago

Expenses recognition Sun Microsystems uses the accrual basis of accounting and recognizes revenue at the Lime it sells goods or

s2008m [1.1K]

Answer:

Sun Microsystems

Amount of Expenses to recognize during the months of June, July, and August in each of the following transactions:

a. Rent Expense = $30,000

b. Utility Expense = $4,650

c. Supplies Expense = $9,700

d. Property Taxes = $1,800

e. No expense is recognized.

f. Salary Expense = $4,500

g. Advertising Expense = $6,600

Explanation:

Data and Calculations:

a. Rent Expense = $180,000/12 * 2 = $30,000 Rent Prepaid $150,000

b. Utility Expense $4,560

c. Supplies Expense $9,700 ($12,600 - $2,900)

d. Property Taxes = $7,200 *3/12 = $1,800

e. No expense is recognized for the advance payment for delivery van.

f. Salary Expense $4,500

g. Advertising Expense $6,600

4 0

3 years ago

Assume a major investment service has just given Oasis Electronics its highest investment rating, along with a strong buy recomm

ruslelena [56]

Answer:

Share price : $ 56.23

Explanation:

CAPM

$Ke= r_f + \beta (r_m-r_f)$

risk free = 0.05

market rate = 0.11

premium market = (market rate - risk free) 0.06

beta(non diversifiable risk) = 1.64

$Ke= 0.05 + 1.64 (0.06)$

Ke 0.14840

Now, we solve for the present value of the future dividends:

year dividend* present value**

1 2.91 2.53

2 3.31 2.51

3 3.78 2.49

4 4.31 2.48

4 80.38 46.22

TOTAL 56.23

*Dividends will be calculate as the previous year dividends tiems the grow rate

during the first four year is 14%

then, we calcualte the present value of all the future dividends growing at 9% using the dividend grow model:

$\frac{D_1}{K_e-g}$

(4.31 x 1.09) / (0.1484 - 0.09) = 80.38

Then we discount eahc using the present value of a lump sum:

$\frac{Cashflow}{(1 + rate)^{time} } = PV$

We discount using the CAPM COst of Capital of 14.84%

last we add them all to get the share price: $ 56.23

4 0

3 years ago