Appendix 1 EX 14-19 Present value of an annuity

On January 1, 2014, you win $75,000,000 in the state lottery. The $75,000,000 prize will be paid in equal installments of $7,500,000 over 10 years. The payments will be made on December 31 of each year, beginning on December 31, 2014. If the current interest rate is 7%, determine the present value of your winnings. Use the present value tables in Appendix A.


Answer:
$7,500,000 × 7.02358 = $52,676,850