User Account

All Pages

Calculate the future value in each case

Assignment Help Accounting Basics
Reference no: EM131744473

Question: You just won the lottery! The jackpot was advertised as $1.5 billion. However, you discover that the $1.5 billion figure is actually the sum of the annuity payments: 30 annual payments of $50 million made at the end of each year. If you want the money as an immediate lump sum, you will only get $930 million.

Part a: Assume the inflation rate is 2%, compounded annually. What is the present value of the annuity payments, discounted for inflation? Is it greater or less than the lump sum offered?

Part b: At what discount rate does the lump sum offered by lottery officials equal the present value of the annuity payments? An approximation is okay here (within 1%).

Part c: Assume that you won't spend any of your lottery winnings for 30 years, regardless of whether you choose lump sum or annuity.

Instead, you plan to invest all of your winnings and earn a 10% annual return. Will the future value (at the end of 30 years) be greater with the lump sum, or the annuity?

Hint: Calculate the future value in each case and compare. Assume interest compounds annually. I know how to do part A and C. I am having trouble with B.

Reference no: EM131744473

Questions Cloud

Example of how telehealth is currently being utilized : Identify an example of how telehealth is currently being utilized.
Identify key facts about short-run economic fluctuations : Identify the three key facts about short-run economic fluctuations and how the economy in the short run differs from the economy in the long run.
What are the types of corporate strategies : What are the types of corporate strategies ? Can you give a example for all categories?
Workplace violence that occurred in healthcare facility : Identify a recent example of workplace violence that occurred in a healthcare facility.
Calculate the future value in each case : You just won the lottery! The jackpot was advertised as $1.5 billion. However, you discover that the $1.5 billion figure is actually the sum of the annuity.
Determine total supply requirements by year : Apply frameworks to determine the locations from which to source supply requirements, manufacture the handbags, and 3PL partner.
Why is it important to overcome communication barriers : Why is it important to overcome communication barriers. What is one strategy that you can use to prevent conflict in the work place
Define religious oppression : Submit a one paragraph rationale for your topic selection. Include the topic identified, the purpose of choosing the topic, and the intended goals of exploring
What is the highest total contribution margin : Assuming that direct labor-hours is the company's constraining resource, what is the highest total contribution margin that the company can earn.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Compute randolph company''s current income tax expense

Compute Randolph Company's current income tax expense.

  Students often confuse stock splits with stock dividends

students often confuse stock splits with stock dividends. what is the main difference between the two? earlier you

  Which type of corporate information is not available to

which type of corporate information is not available to investors? dividend history forecast of cash needs for the

  Analyze the process of accounting for changes in ownership

Determine how a company you researched would approach the change in ownership interest under current GAAP and how that approach would differ under proposed GAAP. Provide specific examples to support your response.

  Detmer holdings ag of zurich switzerland has just

detmer holdings ag of zurich switzerland has just introduced a new fashion watch for which the company is trying to

  How many units of sales to regular customers husky lose

How many units of sales to regular customers would Husky lose if it took on the special order

  What is the payments mechanism

What is the payments mechanism? What changes are occurring in this mechanism? Why are they occurring?- How do smart cards differ from storedvalue cards?

  Occurance of future taxable amount

At the December 31, 2007 balance sheet date, Garth Brooks Corporation reports an accrued receivable for financial reporting purposes but not for tax purposes. When this asset is recovered in 2008, a future taxable amount will occur and

  How should this lease be classified by jefferson

On December 31, 2013, Jefferson Company leased a delivery truck from Branch Motors. How should this lease be classified by Jefferson (the lessee)? Why

  How would you respond to the mayor

A village needs resources to finance its operations for the remainder of 2013. Poor internal control procedures under the previous administration created.

  The following information relates to interstate trucking

the following information relates to interstate trucking for its first year of operations data in millions

  Heritage insurance co is a regional insurance company that

heritage insurance co. is a regional insurance company that began operations on january 1 2012. the following

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd