Question
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The state lottery's million-dollar payout provides for $1.4 million to be paid in 25 installments of...
The state lottery's million-dollar payout provides for $1.4 million to be paid in 25 installments of $56,000 per payment. The first $56,000 payment is made immediately, and the 24 remaining $56,000 payments occur at the end of each of the next 24 years.
If 6 percent is the discount rate, what is the present value of this stream of cash flows?
If 12 percent is the discount rate, what is the present value of the cash flows?
Solutions
Expert Solution
Solution :
If 6 percent is the discount rate, the present value of this stream of cash flows = $ 758,820.02
If 12 percent is the discount rate, the present value of the cash flows = $ 491,921.69
Please find the attached screenshot of the excel sheet containing the detailed calculation for the above solution.
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