ork 2 Saved You just won the TVM Lottery You will receive 1

ork 2 Saved You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $660,000 per year. Thus, in one year, you receive $1.66 million. In two years you get $2.32 million, and so on If the appropriate interest rate is 76 percent, what is the value of your winnings today? (Do not round intermediate caiculations. Enter your answer In dollars, not millions of dollars, and round your answer to 2 decimal places, e.g, 1,234,567.89.) Present value

Solution

Year Cash flows Discount factor Present Value a b c=1.076^-a d=b*c 0 $       10,00,000                   1.0000 $     10,00,000.00 1 $       16,60,000                   0.9294 $     15,42,750.93 2 $       23,20,000                   0.8637 $     20,03,841.85 3 $       29,80,000                   0.8027 $     23,92,100.66 4 $       36,40,000                   0.7460 $     27,15,515.58 5 $       43,00,000                   0.6933 $     29,81,309.74 6 $       49,60,000                   0.6444 $     31,96,009.40 7 $       56,20,000                   0.5988 $     33,65,506.37 8 $       62,80,000                   0.5565 $     34,95,115.03 9 $       69,40,000                   0.5172 $     35,89,624.56 10 $       76,00,000                   0.4807 $     36,53,346.62 Total $ 2,99,35,120.73 Thus, Present Value of of lottery is $ 2,99,35,120.73