Question

Please show formula to find the answer
1) You have just won the lottery. At the end of each of the next 20 years, you will receive a payment of $50,000. If the cost of capital is 10 percent per year, what is the present value of your lottery winnings? 50,000 Cost of Capital Payment Term Rate 20 10% 0 2) A perpetuity is an annuity that is received forever. If I rent my house and at the beginning of each year I receive $14,000, what is the value of this perpetuity? Assume an annual cost of capital of 10 percent. (Hint: use the PV function and let the number of periods be large!). 14,000 Payment Term Rate 10% ($154,000.00)

Answer 1

1.
=50000/10%*(1-1/1.1^20)=425678.185987928

2.
=14000/10%*1.1=154000

3.
=(250000-15000/8%*(1-1/1.08^20))*1.08^20=478809.821490582

4.
=15000000/6%*(1-1/1.06^7)=83735721.594416