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Mr. Dubofsky just won a “Name That Tune” contest and collected a grand prize of $100,000....

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Finance

  1. Mr. Dubofsky just won a “Name That Tune” contest and collected agrand prize of $100,000. However, the contest stipulates that thewinner will receive $10,000 immediately, and $10,000 at the end ofeach of the next 9 years. Assuming that Mr. Dubofsky can earn 10%on his money, how much has he actually won?

Answer & Explanation Solved by verified expert
4.5 Ratings (824 Votes)

Money he actually won is $63,349.26
Statement showing Cash flows
Particulars Time PVf 10% Amount PV
Cash inflows                         -                            1.0000               10,000.00                  10,000.00
Cash inflows                    2.00                          0.9091               10,000.00                    9,090.91
Cash inflows                    3.00                          0.8264               10,000.00                    8,264.46
Cash inflows                    4.00                          0.7513               10,000.00                    7,513.15
Cash inflows                    5.00                          0.6830               10,000.00                    6,830.13
Cash inflows                    6.00                          0.6209               10,000.00                    6,209.21
Cash inflows                    7.00                          0.5645               10,000.00                    5,644.74
Cash inflows                    8.00                          0.5132               10,000.00                    5,131.58
Cash inflows                    9.00                          0.4665               10,000.00                    4,665.07
PV of Cash Inflows =PVCI                  63,349.26

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