Solved: Determine the present value of your winnings, Finance Basics

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Determine the present value of your winnings

Problem:

You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $400,000 per year. Thus, in one year you receive $1.4 million. In two years, you get $1.8 million, and so on. If the appropriate interest rate is 10 percent, what is the present value of your winnings?

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Finance Basics: Determine the present value of your winnings

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