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CengageNOWv2 | Online teac x owcom im takeAssignment takeAssignmentain doinvokerassignments&takeAssignmentSessionLocator-assignment; take&inprogress.; ? E PVIFV Factor Table Calculator Present Value of an Annuity On January 1 you win $50,000,000 in the state lottery. The sso,0o0,000 prize will be paid in equal instalments of $6,250,000 over eight years. The payments will be made on December 31 of each year, beginning on December 31 of this year. If the current interest rate is 12%, determine the value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar 31,050,000 x rate of 12% be more than the present value of your winnings using an interest rate of 5% No v Review the time value of money concept. Recall that the time value of money concept recognizes that cash received today is worth more than the same amount of cash to be received in the future. Next

Explanation / Answer

Annual Payment = $6,250,000
Annual Interest Rate = 12%
Number of payments = 8

Present Value of Winnings = $6,250,000 * PVA of $1 (12%, 8)
Present Value of Winnings = $6,250,000 * 4.9676
Present Value of Winnings = $31,047,500

So, present value of your winnings is $31,047,500

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