In: Finance
Mr. Dubofsky just won a “Name That Tune” contest and collected a grand prize of $100,000. However, the contest stipulates that the winner will receive $10,000 immediately, and $10,000 at the end of each of the next 9 years. Assuming that Mr. Dubofsky can earn 10% on his money, how much has he actually won?
Money he actually won is $63,349.26 | ||||
Statement showing Cash flows | ||||
Particulars | Time | PVf 10% | Amount | PV |
Cash inflows | - | 1.0000 | 10,000.00 | 10,000.00 |
Cash inflows | 2.00 | 0.9091 | 10,000.00 | 9,090.91 |
Cash inflows | 3.00 | 0.8264 | 10,000.00 | 8,264.46 |
Cash inflows | 4.00 | 0.7513 | 10,000.00 | 7,513.15 |
Cash inflows | 5.00 | 0.6830 | 10,000.00 | 6,830.13 |
Cash inflows | 6.00 | 0.6209 | 10,000.00 | 6,209.21 |
Cash inflows | 7.00 | 0.5645 | 10,000.00 | 5,644.74 |
Cash inflows | 8.00 | 0.5132 | 10,000.00 | 5,131.58 |
Cash inflows | 9.00 | 0.4665 | 10,000.00 | 4,665.07 |
PV of Cash Inflows =PVCI | 63,349.26 | |||