FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
A winner of the state lottery was given two choices: receive a single lump sum payment now of $50 million or receive 21 uniform payments, with the first payment to be made now, and the rest to be made at the end of each of the next 20 years. At an interest rate of 4% per year, the amount of
the 21 uniform payments that would be equivalent to the $50 million lump-sum payment is closest to:
a. $3,152,000
b. $3,426,800
c. $3,623,600
d. $3,923,800
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- A 148. Subject:- financearrow_forwardTom Thompson expects to invest $18,000 at 9% and, at the end of a certain period, receive $92,551. How many years will it be before Thompson receives the payment? (PV of $1. FV of $1. PVA of $1. and EVA of $1) (Use appropriate factor(s) from the tables provided. Round "Table Factor" to 4 decimal places.) Future Value $ 92,551 Present Value $ 18,000 = Table Factor Years yearsarrow_forward(Related to Checkpoint 6.2) (Present value of annuity payments) The state lottery's million-dollar payout provides for $1 million to be paid in 25 installments of $40,000 per payment. The first $40,000 payment is made immediately, and the 24 remaining $40,000 payments occur at the end of each of the next 24 years. If 12 percent is the discount rate, what is the present value of this stream of cash flows? If 24 percent is the discount rate, what is the present value of the cash flows? a. If 12 percent is the discount rate, the present value of the annuity due is $ b. If 24 percent is the discount rate, the present value of the annuity due is $ *** (Round to the nearest cent.) (Round to the nearest cent.)arrow_forward
- Waterway Industries will receive $26500 today (January 1, 2020), and also on each January 1st for the next five years (2021 – 2025). What is the present value of the six $26500 receipts, assuming a 8% interest rate?arrow_forwardOn January 1 you win $50,000,000 in the state lottery. The $50,000,000 prize will be paid in equal installments of $6,250,000 over eight years. The payments will be made on December 31 of each year, beginning on December 31 of this year. If the current interest rate is 12%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar. Will the present value of your winnings using an interest rate of 12% be more than the present value of your winnings using an interest rate of 5%?arrow_forwardFind the periodic payment for each sinking fund that is needed to accumulate the given sum under the given conditions. (Round your answer to the nearest cent.) FV = $1,500,000, r = 4.7%, compounded semiannually for 25 yearsarrow_forward
- On January 1 you win $3,480,000 in the state lottery. The $3,480,000 prize will be paid in equal installments of $290,000 over 12 years. The payments will be made on December 31 of each year, beginning on December 31. If the current interest rate is 7%, determine the present value of your winnings. Use the present value tables in Exhibit 7. Round to the nearest whole dollar.arrow_forwardProject for Ma Consider a nominal prize of one million dollars, to be paid in twenty annual payments of $50,000. Assume when each payment is made, the recipient immediately pays Federal income tax at a 25% rate and invests the rest. Assume the funds invested eam 6% per year, with both Federal taxes paid from that income and the remainder reinvested. The Assignment 1. Determine the total amount of money the winner will have at the end of twenty years. This will be one year after the last payment 2. Determine the amount the winner would have had at the end of twenty years if he or she had been given one million dollars all at once under the same conditions regarding taxes and Investment. 3. Determine the amount for a lump sum payment that would leave the winner with the same amount as the annuity after twenty years. 1. Discuss assumptions that were made to simplify this assignment along with important factors that have been omitted.arrow_forward
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