Your family recently won the $10,000,000 lottery and chose to accept the annual payout plan of $500,000 today plus 19 more year-end cash flows of $500,000. If you discount these cash flows at an annual rate of 8.0%, what is their present value?
What will be an ideal response?
Answer:
PV = PMT × × (1 + r)1 = $500,000 × × (1.08)1 = $5,301,799.60.
Explanation: This is a 20-payment annuity due.
Business
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