A lottery administrator has just completed the state's most recent $50 million lottery. Receipts from lottery sales were $50 million and the payout will be $5 million at the end of each year for 10 years. The expenses of running the lottery were $800,000. The state is able to earn an annual return of 8 percent on any funds invested. If you were the lottery administrator and were interested in knowing the dollar amount of net profit, how would you proceed with your computation, assuming that sales proceeds from the lottery were invested at a rate of 8%, followed by end-of-year payouts of $5 million for 10 years and that the expenses were a one-time payment? What would be the net profit in dollar terms? Ignore taxes. Hint: Consider NPV of the project.
B) A lottery administrator has just completed the state's most recent $50 million lottery. Receipts from
lottery sales were $50 million and the payout will be $5 million at the end of each year for 10 years.
The expenses of running the lottery were $800,000. The state is able to earn an annual return of 8
percent on any funds invested.
If you were the lottery administrator and were interested in knowing the dollar amount of net profit,
how would you proceed with your computation, assuming that sales proceeds from the lottery were
invested at a rate of 8%, followed by end-of-year payouts of $5 million for 10 years and that the
expenses were a one-time payment? What would be the net profit in dollar terms? Ignore taxes. Hint:
Consider NPV of the project.
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