Business, 25.01.2020 07:31 hardwick744

You just won the tvm lottery. you will receive $1 million today plus another 10 annual payments that increase by $375,000 per year. thus, in one year, you receive $1.375 million. in two years, you get $1.75 million, and so on. if the appropriate interest rate is 6.5 percent, what is the value of your winnings today?

Answers: 1

Show answers

Answers

Answer from: kat6282

Total Present value (Sum of all PVs $21,624,467.720

Explanation:

The question is asking for the calculation or computation of the total PV of all the payments . This can be derived by summing up the Present Value (PV) of individual cash received.

Step 1: Calculate the Present Value of each cash payment

Formula= PV= C0 + C1/ (1+r) 1 + C2/ (1+r) 2 + …+ C n/ (1+r) n

C0, C1...Cn= Cash payments for each year for the 10 years

r= The rate each period in the question this is 6.5%

Step 2: Use the Formula to calculate annual cash payment

Year Cash payment

0 $1,000,000

1 $1,000,000 + $ 375,000 = $1,375,000

2 $1,375,000 + $ 375000 = $1,750,000

3 $1,750,000 + $ 375000 = $2,125,000

4 $2,125,000 + $ 375000 = $2,500,000

5 $2,500,000 + $ 375000 = $2,875,000

6 $2,875,000 + $ 375000 = $3,250,000

7 3,250,000 + $ 375000 = $3,625,000

8 $3,625,000 + $ 375000 = $4,000,000

9 4,000,000 + $ 375000 = $4,375,000

10 $4,375,000 + $ 375000 = $4,750,000

Step 3: Use the calculated annual cash payments and the formula in step 1 to compute the Total Present Value

Computation of PV:

Yr Cash (C) PV Factor PV Factor @ 6.5 % (F) PV( C x F)

0 1,000,000 1/(1+0.065)^0 1 1,000,000

1 1,375,000 1/(1+0.065)^1 0.939 $1,291,079.812

2 1,750,000 1/(1+0.065)^2 0.882 $1,542,903.745

3 2,125,000 1/(1+0.065)^3 0.828 $1,759,179.320

4 2,500,000 1/(1+0.065)^4 0.777 $1,943,307.727

5 2,875,000 1/(1+0.065)^5 0.730 $2,098,407.405

6 3,250,000 1/(1+0.065)^6 0.685 $2,227,335.886

7 3,625,000 1/(1+0.065)^7 0.644 $2,332,710.029

8 4,000,000 1/(1+0.065)^8 0.604 $2,416,924.751

9 4,375,000 1/(1+0.065)^9 0.567 $2,482,170.372

10 4,750,000 1/(1+0.065)^10 0.533 $2,530,448.669

Total Present value (Sum of all PVs) $21,624,467.720

Answer from: Quest

don't be her freind because that peson is egnoring you so don't be her freind

Answer from: Quest

Provides for personal development. though leadership training, as well as local, state and district conferences, students involved in a ctsos young people in the maturation process, them grow and assume active roles in their community.

Another question on Business

Business, 21.06.2019 21:00

The plastic flowerpots company has two manufacturing departments, molding and packaging. at the beginning of the month, the molding department has 2,100 units in inventory, 70% complete as to materials. during the month, the molding department started 18,500 units. at the end of the month, the molding department had 3,150 units in ending inventory, 80% complete as to materials. units completed in the molding department are transferred into the packaging department. cost information for the molding department for the month follows: beginning work in process inventory (direct materials) $ 1,300 direct materials added during the month 28,900 using the weighted-average method, compute the molding department's (a) equivalent units of production for materials and (b) cost per equivalent unit of production for materials for the month. (round "cost per equivalent unit of production" to 2 decimal places.)

Answers: 1

Answer

Business, 22.06.2019 12:40

Which of the following tasks would be a line cook's main responsibility? oa. frying french fries ob. chopping onions oc. taking inventory of stocked dry goods od. paying invoices

Answers: 2

Answer

Business, 22.06.2019 15:00

Because gloria's immediate concern was the perceived gender discrimination, she would be more concerned about than intent, resultsresults, intentstatistics, trendsrace,gendergender,race

Answers: 2

Answer

Business, 22.06.2019 20:50

The following accounts are from last year’s books at s manufacturing: raw materials bal 0 (b) 157,400 (a) 172,500 15,100 work in process bal 0 (f) 523,600 (b) 133,700 (c) 171,400 (e) 218,500 0 finished goods bal 0 (g) 477,000 (f) 523,600 46,600 manufacturing overhead (b) 23,700 (e) 218,500 (c) 27,700 (d) 159,400 7,700 cost of goods sold (g) 477,000 s manufacturing uses job-order costing and applies manufacturing overhead to jobs based on direct labor costs. what is the amount of cost of goods manufactured for the year

Answers: 3

Answer

You know the right answer?

You just won the tvm lottery. you will receive $1 million today plus another 10 annual payments that...

Questions