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1. What is the value of receiving this perpetuity starting 26 years in the future?  Use the present value of the perpetuity from the last question, and assume you begin receiving the perpetuity 26 years in the future.

A. Infinity

B. = 3,365,375/(0.08)26

C. = 3,365,375/(1.08)26 = 455,004.6

D. = 3,365,375*(1.08)26.

2. What is the present value of the lottery payoff? Notice that receiving $269,230 each year for 26 years is equivalent to receiving the perpetuity, minus the value of the continuing perpetuity after 26 years.

A. =3,365,375 – 455,005 = 2,910,370

B. =7,000,000

C. =3,365,375

D. =7,000,000 – 455005 = $6,544,995

Financial Management, Finance

  • Category:- Financial Management
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