22.A lottery winner was given a perpetual payment of $11, 444. She could invest the cash flows at 7 percent. What is the present value of this perpetuity?
$11,444/.07= $163,485.71
$163,486
To find the present value of a perpetuity, you can use the formula:
Present Value = Cash Flow / Interest Rate
In this case, the cash flow is $11,444 and the interest rate is 7% (or 0.07 in decimal form). Plugging in these values into the formula:
Present Value = $11,444 / 0.07
Calculating this, you get:
Present Value = $163,485.71
Therefore, the present value of the perpetuity is approximately $163,485.71.
To calculate the present value of a perpetuity, we need to use the formula:
Present Value = Cash Flow / Interest Rate
In this case, the cash flow is $11,444 and the interest rate is 7% (or 0.07 as a decimal).
Now, we can substitute these values into the formula to find the present value:
Present Value = $11,444 / 0.07
Present Value ≈ $163,485.71
Therefore, the present value of this perpetuity is approximately $163,485.71.