Question 33745: Prizes are often not "worth" as much as claimed. What is the real value of a prize of $5,000,000 which is to be received in equal payments over 20 years, with the first payment beginning today? Assume an interest rate of 5% over the 20 years.
Answer by venugopalramana(3286)   (Show Source):
You can put this solution on YOUR website! TABULATE AS FOLLOWS IN XL WORK SHEET WHICH IS SELF EXPLANATORY.IF YOU GO TO FUNCTIONS-FINANCIALS AT THE END AND GIVE THE DISCOUNT RATE OF 0.05 AND NET INFLOW COLUMN AS THE DATA,YOU WILL GET NPV AT THE END.THE FORMULA IN XL IS.
=NPV(0.05,D256:D275)WHERE 0.05 IS THE DISCOUNT RATE GIVEN AS 5% PER YEAR AND D256:D275 IS THE COLUMN WHERE NETINFLOW IS DEPICTED.IF YOU WANT TO KNOW MATHMATICAL FORMULA FOR THIS PLEASE COME BACK AND WE SHALL EXPLAIN
IT IS WORTH $3,115,552.59 TO DAY
YEAR INFLOW OUTFLOW NETINFLOW
1 250000 250000
2 250000 250000
3 250000 250000
4 250000 250000
5 250000 250000
6 250000 250000
7 250000 250000
8 250000 250000
9 250000 250000
10 250000 250000
11 250000 250000
12 250000 250000
13 250000 250000
14 250000 250000
15 250000 250000
16 250000 250000
17 250000 250000
18 250000 250000
19 250000 250000
20 250000 250000
NPV $3,115,552.59
|
|
|
