Exercise 14A-6 (Algo) Basic Present Value Concepts [LO14-7]

The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the state's newest millionaire. By choosing the six winning numbers on last week's state lottery, Mr. Ormsby won the week's grand prize totaling $1.34 million. The State Lottery Commission indicated that Mr. Ormsby will receive his prize in 20 annual installments of $67,000 each.

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. If Mr. Ormsby can invest money at a 9% rate of return, what is the present value of his winnings? (Enter your answer in dollars and not in millions of dollars.)

Present value: