Calculating present value of TVM lottery winnings
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You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $400,000 per year. Thus, in one year you receive $1.4 million. In two years, you get $1.8 million, and so on. If the appropriate interest rate is 10 percent, what is the present value of your winnings?
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Solution Summary
Solution describes the steps in calculating present value of cash flows of TVM lottery winningns.
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Solution
Year Amount Recd Present Value Factor @10% Present Value
Factor =1/(1.10)^n FV*PV Factor
0 $1,000,000 1.000000 $1,000,000
1 ...
Education
- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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