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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 has won the week's grand prize totaling 1.6 million. The State Lottery Commission has indicated that Mr. Ormsby will receive his prize in 20 annual instalments of 80,000 the following.
Required:
(a) If Mr. Ormsby can invest money at a 12% rate of return, what is the present value of his winnings?

Respuesta :

the  present value of his winning is $6,37,040

Elaborate:

The computation of the present value of his winning is shown below:

= Annual installment × PVIFA factor at 20 years for 12%

= $80,000 × 7.963

= $6,37,040

Hence, the  present value of his winning is $6,37,040

What present value means?

Present value is that the value right now of some amount of money in the future. for instance , if you're promised $110 in one year, this value is the current value of that $110 today.

What is present value and how is it calculated?

The present value formula is PV=FV/(1+i)n, where you divide the longer term value FV by a factor of 1 + i for each period between present and future dates. Input these numbers within the present value calculator for the PV

Learn more about present value:

brainly.com/question/15904086

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