Present value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return . If Mr. Ormsby can invest money at 12% rate of return, what is the present value of his winnings? Is it correct to say that Mr. Ormsby is the "state' s newest millionaire"? Explain your answer.

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Chapter 12.A, Problem 6E

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Present value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

If Mr. Ormsby can invest money at 12% rate of return, what is the present value of his winnings?

Is it correct to say that Mr. Ormsby is the "state' s newest millionaire"? Explain your answer.

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The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state’s newest millionaire. By choosing the six winning numbers on last week’s state lottery, Mr. Ormsby won the week’s grand prize totaling $1.06 million. The State Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $53,000 each. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. If Mr. Ormsby can invest money at a 10% rate of return, what is the present value of his winnings? (Enter your answer in dollars and not in millions of dollars.)

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