Bob's Lottery Inc. has decided to offer winners a choice of $125,000 in 10 years or...

 

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Bob's Lottery Inc. has decided to offer winners a choice of $125,000 in 10 years or some amount currently. Assume that Bob's Lottery Inc. earns a 9 percent after-tax rate of return. What amount should Bob's offer lottery winners currently, in order to be Indifferent between the two choices? Use Exhibit 3.1. EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 4% .962 .925 .889 .855 .822 .790 .760 .731 .703 .676 .614 .650 585 .625 557 .601 .530 577 .505 2 5% 6% 7% 8% 9% 10% 11% 12% .901 .893 952 943 935 926 917 .909 .907 .890 .873 .857 .842 .826 .812 .797 .864 .840 .751 .731 712 .636 567 .816 .794 .772 .823 .792 .763 .735 .708 .683 .659 .784 747 713 .681 .650 .621 593 746 .705 .666 .630 596 564 .535 .507 .665 .623 583 547 513 .482 452 582 540 502 467 .434 .404 544 500 .460 424 .711 .677 .627 391 361 .645 592 .558 527 .475 352 322 508 .463 .422 386 .429 388 .350 317 287 497 444 397 .356 319 .286 257 469 .415 368 326 290 258 229 442 388 340 .299 263 232 205 362 315 275 239 .209 183 .... 5- P ▬▬▬ .555 481 417 i .... Bob's Lottery Inc. has decided to offer winners a choice of $125,000 in 10 years or some amount currently. Assume that Bob's Lottery Inc. earns a 9 percent after-tax rate of return. What amount should Bob's offer lottery winners currently, in order to be Indifferent between the two choices? Use Exhibit 3.1. EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 4% .962 .925 .889 .855 .822 .790 .760 .731 .703 .676 .614 .650 585 .625 557 .601 .530 577 .505 2 5% 6% 7% 8% 9% 10% 11% 12% .901 .893 952 943 935 926 917 .909 .907 .890 .873 .857 .842 .826 .812 .797 .864 .840 .751 .731 712 .636 567 .816 .794 .772 .823 .792 .763 .735 .708 .683 .659 .784 747 713 .681 .650 .621 593 746 .705 .666 .630 596 564 .535 .507 .665 .623 583 547 513 .482 452 582 540 502 467 .434 .404 544 500 .460 424 .711 .677 .627 391 361 .645 592 .558 527 .475 352 322 508 .463 .422 386 .429 388 .350 317 287 497 444 397 .356 319 .286 257 469 .415 368 326 290 258 229 442 388 340 .299 263 232 205 362 315 275 239 .209 183 .... 5- P ▬▬▬ .555 481 417 i .... Bob's Lottery Inc. has decided to offer winners a choice of $125,000 in 10 years or some amount currently. Assume that Bob's Lottery Inc. earns a 9 percent after-tax rate of return. What amount should Bob's offer lottery winners currently, in order to be Indifferent between the two choices? Use Exhibit 3.1. EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 4% .962 .925 .889 .855 .822 .790 .760 .731 .703 .676 .614 .650 585 .625 557 .601 .530 577 .505 2 5% 6% 7% 8% 9% 10% 11% 12% .901 .893 952 943 935 926 917 .909 .907 .890 .873 .857 .842 .826 .812 .797 .864 .840 .751 .731 712 .636 567 .816 .794 .772 .823 .792 .763 .735 .708 .683 .659 .784 747 713 .681 .650 .621 593 746 .705 .666 .630 596 564 .535 .507 .665 .623 583 547 513 .482 452 582 540 502 467 .434 .404 544 500 .460 424 .711 .677 .627 391 361 .645 592 .558 527 .475 352 322 508 .463 .422 386 .429 388 .350 317 287 497 444 397 .356 319 .286 257 469 .415 368 326 290 258 229 442 388 340 .299 263 232 205 362 315 275 239 .209 183 .... 5- P ▬▬▬ .555 481 417 i .... Bob's Lottery Inc. has decided to offer winners a choice of $125,000 in 10 years or some amount currently. Assume that Bob's Lottery Inc. earns a 9 percent after-tax rate of return. What amount should Bob's offer lottery winners currently, in order to be Indifferent between the two choices? Use Exhibit 3.1. EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 4% .962 .925 .889 .855 .822 .790 .760 .731 .703 .676 .614 .650 585 .625 557 .601 .530 577 .505 2 5% 6% 7% 8% 9% 10% 11% 12% .901 .893 952 943 935 926 917 .909 .907 .890 .873 .857 .842 .826 .812 .797 .864 .840 .751 .731 712 .636 567 .816 .794 .772 .823 .792 .763 .735 .708 .683 .659 .784 747 713 .681 .650 .621 593 746 .705 .666 .630 596 564 .535 .507 .665 .623 583 547 513 .482 452 582 540 502 467 .434 .404 544 500 .460 424 .711 .677 .627 391 361 .645 592 .558 527 .475 352 322 508 .463 .422 386 .429 388 .350 317 287 497 444 397 .356 319 .286 257 469 .415 368 326 290 258 229 442 388 340 .299 263 232 205 362 315 275 239 .209 183 .... 5- P ▬▬▬ .555 481 417 i ....

Answer rating: 100% (QA)

From the table Present value factor at 9 ... View the full answer