Question

Suppose you won a $77,000 after-tax cash prize in the lottery. You want to start a new business that you think will lose money for a while, after which it will be up and running and bringing in big bucks. You plan to invest the funds immediately in securities that are expected to earn 8% per year. Suppose you would need only $19,000 per year during the start-up period. How long could you operate before you would require cash from the new business, i.e., how long could you receive payments of $19,000 per year? The first withdrawal will be made a year from today, and your answer will contain a fraction of a year.

Answer 1

The right solution is "5.09 years".

Step-by-step explanation:

The given values are:

Lottery amount

= $77,000

Withdrawal

= $19,000

Rate

= 8%

The number of withdrawal will be:

⇒
`NPER(Rate,-withdrawal,lottery \ amount)`

On putting the values, we get

⇒
`NPER(8 \ percent,-19000,77000)`

⇒
`5.09 \ years`