Sally has just won the million-dollar Big Slam jackpot at a gambling casino. The

Question

Sally has just won the million-dollar Big Slam jackpot at a gambling casino. The casino will pay her $50,000 per year for 20 years as the payoff.

Click here to view Exhibit 11B-2, to determine the appropriate discount factor using tables.

If Sally can invest money at a 10% rate of return, what is the present value of her winnings? (Round discount factor to 3 decimal places, intermediate and final answer to the nearest dollar amount.)

Click here to view Exhibit 11B-2, to determine the appropriate discount factor using tables.

Explanation / Answer

PV = 50000(1+1/1.1 + 1/1.1^2 +......+1/1.1^20) = 500000 x 8.51 PV =$ 425678.186

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