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The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state’s newest millionaire. By choosing the six winning numbers on last week’s state lottery, Mr. Ormsby won the week’s grand prize totaling $1.38 million. The State Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $69,000 each. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. If Mr. Ormsby can invest money at a 11% rate of return, what is the present value of his winnings?

Sagot :

Answer:

the  present value of his winning is $549,447

Explanation:

The computation of the present value of his winning is shown below:

= Annual installment × PVIFA factor at 20 years for 11%

= $69,000 × 7.963

= $549,447

Hence, the  present value of his winning is $549,447

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