Present Value of an Annuity On January 1 you win 60000000 in

Present Value of an Annuity

On January 1, you win $60,000,000 in the state lottery. The $60,000,000 prize will be paid in equal installments of $6,000,000 over 10 years. The payments will be made on December 31 of each year, beginning on December 31 of the current year. If the current interest rate is 6%, determine the present value of your winnings. Use Table 3. Round to the nearest whole dollar.

Use Table 3 Attached Below

P resent Value of Ordinary Annuity of $1 per Period 0.95238 1.85941 0.93897 093458 262432 362990 38998 4.99553 568297 6.33457 6.95220 7.53763 524214 4.76654 5.38929 5.97130 6.59589 6.46321 743533 7.02358 749867 9.38507 998565 1056312 11.11839 12 9.39357 8.59974 8.35765 8.74547 14 958965 10.03758 10.73955 11 ,65230 12.16567 12.65930 10.83777 11.27407 11.68959 1208532 12.46221 10.10590 10.47726 10.82760 944665 9.76322 10.05909 10.33560 1059401 16 18 19 20 10.43247 1259329 13.00794 1160765 11.46992 13.16300 13.48857 13,79864 1341393 14.09394 10.83553 11.06124 1127219 11.46933 11.65358 13.78442 11.53520 1485684 15.24696 15.62208 14.49548 25 12.78336 12.19788 14.37519 14.64303 14.89813 15.14661 15.98277 16.32959 13,66250 1300317 13.21053 13.40616 11.82578 11.98671 12.57500 12.74648 1290749 13.05868 1389810 15.74287 16.02189 29 12.27767 17.29203 15.37245 13.76483 1253181 12.64656 12.75379 12.85401 12.94767 31 32 1758849 16.78889 17.02286 17.24676 17.46101 16.00255 16.19290 16.37419 13.45909 13.57661 18.14765 15.23703 14.36814 14.49825 35 40 19.79277 1333171 19.15635 16.54773 15.45583 14.48023 13.60552 19.76201 13 80075

Solution

Present value of winnings=$6,000,000*Present value of annuity factor(6%,10)

=$6,000,000*7.36009

which is equal to

=$44,160,540.