You have just won the lottery. You will receive $10,000,000 today, and then rece

Question

You have just won the lottery. You will receive $10,000,000 today, and then receive 40 payments of $2,700,000 These payments will start one year from now and will be paid every six months. A representative from Greenleaf Investments has offered to purchase all the payments from you for $50,000,000. The interest rate is an APR of 10 percent compounded daily. Assume there are 365 days in a year. What is the present value of the cash flows from your lottery winnings? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

semi-annual interest rate r = (1+0.10/365)^182.5 - 1 = 5.1264%

PV = 10,000,000 + 2,700,000 [(1 + 0.051264)^40 - 1] / [ 0.051264 (1 + 0.051264)^40] / (1+0.051264)

PV = 10,000,000 + 45,538,702.76/(1.0.051264)

PV = 53,318,046.43

It would be better to keep your winnings.

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