What Is the Present Value of a Lottery Paid as an Annuity

question 87

Multiple Choice

What is the present value of a lottery paid as an annuity due for twenty years if the cash flows are $150,000 per year and the appropriate discount rate is 7.50%?

• A)$5,000,000.00
• B)$3,186,045.39
• C)$2,739,769.55
• D)$1,643,861.73

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Definitions:

Fixed Costs

Fixed costs are business expenses that remain unchanged regardless of the level of goods or services produced, such as rent, salaries, and insurance premiums.

Variable Cost

Costs that vary directly with the level of production or sales, such as raw materials and labor expenses.

Steel

An alloy of iron and carbon, and sometimes other elements, known for its high tensile strength and ability to be shaped into various forms.

Total Cost Curve

A graphical representation that shows how the total cost of production changes as the quantity of output changes.