You have just received notification that you have won the $3 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 63 years from now.

You have just received notification that you have won the $3 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you’re around to collect), 63 years from now.

 

What is the present value of your windfall if the appropriate discount rate is 10 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 

Present value

$

Explanation:

To find the PV of a lump sum, we use:

PV = FV / (1 + r)t

PV = $3,000,000 / (1.10)63 = $7,402.56

Calculator Solution:

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Enter

63

10%

$3,000,000

N

I/Y

PV

PMT

FV

Solve for

$7,402.56