The Caldwell Herald newspaper reported the following story: Frank Ormsby of Caldwell is the states newest millionaire. By choosing the six winning numbers on last weeks state lottery, Mr. Ormsby has won the weeks grand prize totaling $1.5 million. The State Lottery Commission has indicated that Mr. Ormsby will receive his prize in 20 annual installments of $75,000 each.

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Required:

1.

If Mr. Ormsby can invest money at a 10% rate of return, what is the present value of his winnings? (Use the appropriate table to determine the discount factor(s).)

Present value X Factor Value = Net present Value ?