Asked Nov 9, 2019

YOU WIN $500,000 do you want to be paid out all at once or do you want to receive annual end of year payments of $33,000 for 20 years. you can earn 3% per year, what is the persent value of the annuity stream.




Expert Answer

Step 1

Calculation of Present Value of Annuity Stream:

The present value of annuity stream is $490,956.67.

Excel Spreadsheet:


Image Transcriptionclose

А В 1 Annual Payments 2 Interest Rate $33,000 3% 3 Number of Years 20 4 PV of Annuity Stream $490,956.67

Step 2

Excel Workings:


Image Transcriptionclose

А В 1 Annual Payments 33000 0.03 20 2 Interest Rate 3 Number of Years 4 PV of Annuity Stream PV(B2,B3,-B1,0)


Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Time Value

Related Finance Q&A

Find answers to questions asked by student like you
Show more Q&A

Q: Nanometrics, Inc. has a beta of 2.01. If the market return is expected to be 12.50 percent and the r...

A: Required Return: It is the rate of return which is the least satisfactory return an investor may ant...


Q: The Price-Earning ratio (P/E) of stock  A, B, C are 5, 3, 7 respectively. Which one you should buy?

A: A Price-earnings ratio is the relationship between firm's stock price and earnings per share. The hi...


Q: Living Colour Co. has a project available with the following cash flows:  Year Cash Flow 0 −$35...

A: Net present worth of a project can be calculated by considering the present value of cashflows. Cash...


Q: The current price of XL Corporation stock is $40.  In each of the next two years, this stock price c...

A: Calculate the probabilities: p is 57.37% and 1-p is 42.63%.


Q: Company ABC just sold their most profitable division for $100 million in cash. The company has a mar...

A: B)(i)The expected market values on the balance sheet is as follows:


Q: a firm has an asset base with a market value of 5.3 million. ITs debt is worth 2.5 million. if 0.2 m...

A: Weighted average cost of capital can be used to estimate the rate which should be provided to invest...


Q: Suppose that MNINK Industries’ capital structure features 63 percent equity, 8 percent preferred sto...

A: WACC refers to a firm's weighted average cost of capital. It is the rate that a firm  pays to its se...


Q: ​(IRR calculation)   Jella Cosmetics is considering a project that costs ​$800,000 and is expected t...

A: Calculation of IRR of the Project by using IRR function of excel:To open the "IRR function" window -...


Q: A stock has yielded returns of 6 percent, 11 percent, 14 percent, and -2 percent over the past four ...

A: The formula to calculate mean value is given below: