Consider the following information and compute the present value.

Years | Interest Rate | Future Value |

21 | 11% | $655,816 |

You have just received notification that you have won the $1 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday (assuming you re around to collect), 80 years from now.

What is the present value of your windfall if the appropriate discount rate is 8.45 percent?

Wally, president of Wally’s Burgers, is considering franchising. He has a potential franchise agreement that would allow him to receive 19 end-of-year payments starting one year from now. The first two payments would be $27,000 and $23,000 in one and two years respectively, and then $19,000 per year after that for 17 years. If Wally requires a return of 9.9%, what is the present value of this stream of cash flows?

Mike needs to have $120,000 in 6 years to pay for his daughter’s college expenses. To have this amount ready, how much would John have to invest now if his preferred investment is paying 4% interest?

a. $96,685.68

b. $94,837.74

c. $98,859.32

d. $100,215.87

e. None of these is true