: Richland College xQuiz Chpt 11 x G Fimbrez Corporation C ezto.mheducation.com/

Question

: Richland College xQuiz Chpt 11 x G Fimbrez Corporation C ezto.mheducation.com/hm.tpx Question 4 (of 10) The Caldwell Herald newspaper reported the following story: Frank Omsby of Caldwell is the state's newest millionaire. By choosing the six winning numbers on last week's state lottery, Mr Ormsby has won the week's grand prize totaling $1.42 million. The State Lottery Commission has indicated that Mr. Ormsby will receive his prize in 20 annual installments of $71,000 each. Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables Required: 1 If Mr. Ormsby can invest money at a 7% rate of return, what is the present value of his winnings? (Use the appropriate table to determine the discount factor s)) Net Present Value Net Present Value Present Value Factor Value 71,0001 K 10.594.0001 | $752174,000 0 Type here to search

Explanation / Answer

The present value of his winnings will be :

annual installments = $71,000

present value factor @ 7 %

no of years = 20 years or 20 installments

present value = $71,000 * (PVIAF 7%,20years)

   =$71,000 * 10.5940142447

   = $752,175.00

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