William Winbig has won the Set for Life lottery and will receive a payment of $79,458

Finance Aug 17, 2020

William Winbig has won the Set for Life lottery and will receive a payment of $79,458.37 every year, starting today, for the next 20 years. If William invests the proceeds at a rate of 7.25 percent per annum, what will be the present value of the cash flows he will receive?

Expert Solution

Present value of cash flow= (1+ r)* PMT* (1- (1/ (1+ r^ n)))/ r

= (1+ 7.25%)* $79,458.37* (1- (1/ (1+ 7.25%^ 20)))/ 7.25%

= $885,532.74

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