Chapter 7, Problem 041 Your answer is incorrect. Try agair. Several years ago, a
ID: 2539255 • Letter: C
Question
Chapter 7, Problem 041 Your answer is incorrect. Try agair. Several years ago, a man won $27,000,000 in the state lottery. To pay off the winner, the state planned to make an initial $1,000,000 payment immediately, followed by equal annual payments of $1,300,000 at the end of each year for the next 20 years. Just before receiving any money, the man offered to sell the winning ticket back to the state for a one-time immediate payment of $14,400,000. Use an annual worth analysis. If the state uses a 696/year MARR, should it accept the man's offer? Show the annual worth of each option Lottery Payout: One-Time Payment: Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±3%. Click here to access the TVM Factor Table CalculatorExplanation / Answer
Present value of the lottery ticket today
= $100000+$1300000{1+1/(1.06)20}
=$100000+$14910897.58
=$15910900
Man offerred to accept=$14400000
Since he is demanding less amount than its net worth , his offer should be accepted.
Yes
Lottery payout $15910900
One time payment$ 14400000
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