Question

Francis Scott Key just won a​ "Name That​ Tune" contest with a grand prize of

​$270 comma 000270,000.

​ However, the contest stipulates that the winner will receive

​$70 comma 00070,000

​immediately, and the remainder divided equally at the end of each of the next

1111

years. Assuming that he can earn

33​%

on his​ money, what is the present value of his​ winnings?

Answer 1

Year	Cash flow	× factor@ 33.00%	Present value
0	$        70,000.00	1.000000	$             70,000.00
1	$        18,181.82	0.751880	$             13,670.54
2	$        18,181.82	0.565323	$             10,278.60
3	$        18,181.82	0.425055	$                7,728.27
4	$        18,181.82	0.319590	$                5,810.73
5	$        18,181.82	0.240293	$                4,368.97
6	$        18,181.82	0.180672	$                3,284.94
7	$        18,181.82	0.135843	$                2,469.88
8	$        18,181.82	0.102138	$                1,857.05
9	$        18,181.82	0.076795	$                1,396.28
10	$        18,181.82	0.057741	$                1,049.83
11	$        18,181.82	0.043414	$                   789.35
			$                            -
Present value			$           122,704.45

Present value of winnings is $122,704.45