Question

Rita Gonzales won the $47 million lottery. She is to receive $2.7 million a year for the next 15 years plus an additional lump sum payment of $6.5 million after 15 years. The discount rate is 10 percent.

What is the current value of her winnings? Use Appendix B and Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.(Do not round intermediate calculations. Round your final answer to 2 decimal places.)
  

Answer 1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=2.7/1.1+2.7/1.1^2+..................+2.7/1.1^15+6.5/1.1^15

=$22.09 million(or $22,092,462.99 approx).