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    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 Preview

    Please see the attached file for complete details.


    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 ...

    Solution Summary

    Solution describes the steps in calculating present value of cash flows of TVM lottery winningns.