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you win a judgement in an auto accident case for $115,000 you immediately receive $20,000 but...

you win a judgement in an auto accident case for $115,000 you immediately receive $20,000 but must pay your lawyer's fee of $15,000 in addition you will receive $3,000 a year for 20 years for a total of $60,000 after which the balance owed $35,000 will be paid if the interest rate is 7% what is the current value of your settlement? use appendix b and appendix d to the question round your answer to the nearest dollar

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Answer #1

Answer:

PV of $1 ordinary annuity for 20 years at 7% discount rate = 10.59401

PV of $1 for 20 years at 7% discount rate = 0.25842

Current value of settlement = (Amount received immediately - lawyer's fee) + PV of ordinary annuity of $3000 received for 20 years + PV of $35,000 received after 20 years

= (20000 - 15000) + 3000 * 10.59401 + 35000 * 0.25842

= $45,826.73

Current value of settlement = $45,826.73

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