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Ken Jones has just won the state lottery. The state offers the following three payout options for after-tax prize money:

1. $50,000 per year at the end of each of the next six years
2. $300,000 (lump sum) now
3. $400,000 (lump sum) six years from now

Calculate the present value of each scenario using an 8% annual discount rate. Round to nearest whole dollar.

Present value of an ordinary annuity of $1:

   7%   8%   9%
1   0.935   0.926   0.917
2   1.808   1.783   1.759
3   2.624   2.577   2.531
4   3.387   3.312   3.240
5   4.100   3.993   3.890
6   4.767   4.623   4.486

Present value of $1:

   7%   8%   9%
1   0.935   0.926   0.917
2   0.873   0.857   0.842
3   0.816   0.794   0.772
4   0.763   0.735   0.708
5   0.713   0.681   0.650
6   0.666   0.630   0.596
Textbook 
Horngren's Financial & Managerial Accounting, The Financial Chapters

Horngren's Financial & Managerial Accounting, The Financial Chapters


Edition: 5th
Authors:
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7 years ago
This was certainly a tough question, loving the expertise
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