You and 11 coworkers just won $12 milion ($1,000,000 each) from the state lotter

Question

You and 11 coworkers just won $12 milion ($1,000,000 each) from the state lottery. Assuming you each receive your share over 18 years and that the state lottery earns a 6.0 percent return on its funds, what is the present value of your prize before taxes if you request the up-front cash' option? Note: Also assume an ordinary annuity-payments made at the end of each period. Click on the table icon to view the annuity table. Assuming you each receive your share over 18 years and that the state lottery earns a 6.0 percent return on its funds, the present value of your prize before taxes if you request the up-front cash' option is (Round your answer to the nearest dollar)

Explanation / Answer

Therefore present value of winnings for all coworkers combined = $ 7.2184 million

present value of winnings for each coworker = $ 7.2184 million/12 = $.60153327 million

All figures are in million dollars Total winnings 12 Payment each year =total winnings/ number of years 0.666666667 YTM Period Payment each year Discounted vale of year weighted cash flow Discounted cash flow 6 1.06 1 0.666666667 1.06 0.628931 2 0.666666667 1.1236 0.593331 3 0.666666667 1.191016 0.559746 4 0.666666667 1.262477 0.528062 5 0.666666667 1.338226 0.498172 6 0.666666667 1.418519 0.469974 7 0.666666667 1.50363 0.443371 8 0.666666667 1.593848 0.418275 9 0.666666667 1.689479 0.394599 10 0.666666667 1.790848 0.372263 11 0.666666667 1.898299 0.351192 12 0.666666667 2.012196 0.331313 13 0.666666667 2.132928 0.312559 14 0.666666667 2.260904 0.294867 15 0.666666667 2.396558 0.278177 16 0.666666667 2.540352 0.262431 17 0.666666667 2.692773 0.247576 18 0.666666667 2.854339 0.233563 Sum of all discounted cash flows = 7.218402321

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