Congratulations! You have just won America’s Got Talent and the much-ballyhooed grand prize of $1 million! However, had you read the fine print at the end of the show’s credits, you would have seen that the prize is actually an annuity paid out in equal payments over a 40-year period (or $25,000 per year). If your opportunity cost is 6%, what is the actual value of this prize to you at the time of your victory? Assume the first payment is made immediately.

Answer rating: 100% (QA)

The present value of the prize can be calculated using the present value of an annuity formu... View the full answer