Prizes Are Often Not "Worth" as Much as Claimed

question 30

Multiple Choice

Prizes are often not "worth" as much as claimed. Place a value on a prize of $5,000,000 that is to be received in equal payments over 20 years, with the first payment beginning today. Assume an interest rate of 7%.

• A) $2,833,898.81
• B) $2,911,015.68
• C) $2,609,144.14
• D)$2,738,304.13

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Definitions:

Zero-Based

A budgeting method where all expenses must be justified for each new period, starting from a "zero base," without reference to previous budgets.

Incremental

Pertaining to an increase or addition, especially in a series of small, regular steps.

Depreciation

A method of allocating the cost of a tangible asset over its useful life.

Amortization

The process of spreading out a loan into a series of fixed payments over time, covering both principal and interest.