Congratulations! You have just won a $40 million lottery and have electedto receive $2 million per year for 20 years. Assume that a 4 percent interestrate is used to evaluate the annuity and that you receive each payment atthe beginning of the year.a. What is the present value of the lottery?b. How much interest is earned on the present value to make the $2 millionper-year payment?

Congratulations! You have just won a $40 million lottery and have electedto receive $2 million per year for 20 years. Assume that a 4 percent interestrate is used to evaluate the annuity and that you receive each payment atthe beginning of the year.a. What is the present value of the lottery?b. How much interest is earned on the present value to make the $2 millionper-year payment?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 6MC: You want to invest $8,000 at an annual Interest rate of 8% that compounds annually for 12 years....

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Congratulations! You have just won a $40 million lottery and have elected to receive $2 million per year for 20 years. Assume a 4% interest rate is used to evaluate the annuity and that you receive each payment at the beginning of each year. a. What is the present value of the lottery? b. How much interest is earned on the percent value to make $2 million per-year payment?
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