Chapter 7, Problem 041 Your answer is incorrect. Try agair. Several years ago, a

Question

Chapter 7, Problem 041 Your answer is incorrect. Try agair. Several years ago, a man won $27,000,000 in the state lottery. To pay off the winner, the state planned to make an initial $1,000,000 payment immediately, followed by equal annual payments of $1,300,000 at the end of each year for the next 20 years. Just before receiving any money, the man offered to sell the winning ticket back to the state for a one-time immediate payment of $14,400,000. Use an annual worth analysis. If the state uses a 696/year MARR, should it accept the man's offer? Show the annual worth of each option Lottery Payout: One-Time Payment: Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±3%. Click here to access the TVM Factor Table Calculator

Explanation / Answer

Present value of the lottery ticket today

= $100000+$1300000{1+1/(1.06)20}

=$100000+$14910897.58

=$15910900

Man offerred to accept=$14400000

Since he is demanding less amount than its net worth , his offer should be accepted.

Yes

Lottery payout $15910900

One time payment$ 14400000

Pls give your feedback!! Happy Learning :)

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.