Finance
You have just won the lottery and will receive $1,000,000 in one year. You will receive payments for 30 years, which will increase 5 percent per year. The appropriate discount rate is 8 percent.
What is the present value of your winnings?
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Answers
The present value of your winnings is $1,438,369.87. This amount is calculated by determining the present value of each future payment with the following formula: PV=FV/(1+r)^n, where PV is the present value, FV is the future value, r is the discount rate, and n is the number of periods. This formula is used to calculate the present value by determining what the value of a future payment would be worth today, taking into account the time value of money. The present value of your winnings is the total of all the discounted future payments.
