You have just won “$10,000,000” in a lottery. However, when you go to collect your check...
You have just won “$10,000,000” in a lottery. However, when you go to collect your check you find that the “$10,000,000” is actually payments of $1,000,000 per year for the next 10 years. How much should you be willing to accept now, in a lump sum, if your opportunity cost discount rate is 10%? Round your answer to the nearest dollar.
Homework Answers
Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate
=1,000,000[1-(1.1)^-10]/0.1
=1,000,000*6.14456711
=$6144567(Approx).
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