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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Present value of an annuity

On January 1, you win $60,000,000 in the Male lottery. The $60,000,000 prize will be paid in equal installments of $6,000,000 over 10 years. The payments will be made on December 31 of each year, beginning on December 31 of the current year. If the current interest rate is 6%, determine the present value of your winnings. Use the present value tables in Appendix A.

To determine

Present Value: The value of today’s amount expected to be paid or received in the future at a compound interest rate is called as present value.

To calculate: The present value of winnings.

Explanation

Calculate the present value of winnings.

Present value=(Future amount×Present value of annuity of $1for 10x

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