You win the lottery and must decide how to take the payout. Use a 10% discount rate. What is the present value of $14,000 a year received at the end of each of the next five years? Present Value of $1
Present Value of Annuity of $1

Question

You win the lottery and must decide how to take the payout. Use a 10% discount rate. What is the present value of $14,000 a year received at the end of each of the next five years? Present Value of $1
 Present Value of Annuity of $1

Quizplus · Accepted Answer

To calculate the present value of an annuity, we use the formula PV = PMT x [1 - 1/(1+r)^n] / r, where PV is the present value, PMT is the annual payment, r is the discount rate, and n is the number of years. Plugging in the given values, we get PV = $14,000 x [1 - 1/(1+0.1)^5] / 0.1 = $53,074. Therefore, the best choice is D.

You Win the Lottery and Must Decide How to Take