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 The state​ lottery's million-dollar payout provides for ​$1.2 million to be paid in 20 installments of...

 The state​ lottery's million-dollar payout provides for ​$1.2 million to be paid in 20 installments of ​$60,000 per payment. The first ​$60,000 payment is made​ immediately, and the 19 remaining ​$60,000 payments occur at the end of each of the next 19 years.

If 7 percent is the discount​ rate, what is the present value of this stream of cash​ flows?

If 7 percent is the discount​ rate, the present value of the annuity due is ?

If 14 percent is the discount​ rate, what is the present value of the cash​ flows?

If 14 percent is the discount​ rate, what is the present value of the annuity​ due?

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Answer #1

the present value is calculated using PV function in EXCEL

where pmt is the payment per year = 60000

nper = no. of payments = 19

rate = discount rate

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