Question

You win a lottery that pays $10,000 each year for the next 5 years beginning next year. How much are your winnings worth today

Answer 1

$43,294.77

Step-by-step explanation:

Here is the full question used in answering this quetion :

You win a lottery that pays $10,000 each year for the next 5 years beginning next year. How much are your winnings worth today if the market interest rate is 5%?

Present value is the sum of discounted cash flows

PV can be calculated with a financial calculator

Cash flow in year 1 - 5 = $10,000

i = 5%

PV = $43,294.77

To find the PV using a financial calculator:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute