The Caldwell Herald newspaper reported the following story: Frank Ormsby of Cald
ID: 2526649 • Letter: T
Question
The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state's newest millionaire. By choosing the six winning numbers on last week's state lottery, Mr. Ormsby won the week's grand prize totaling $1.24 million. The State Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $62,000 each. Click here to view Exhibit 138-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables points Required 1. If Mr. Ormsby can invest money at a 10% rate of return, what is the present value of his winnings? eBook Print Present value ReferencesExplanation / Answer
SOLUTION
Net Present value = $527,868
Net Present value = Present value * Factor value
= $62,000 * 8.514
= $527,868
PV of $1, n = 20 , i= 10% = 8.514
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