AE309 Lecture 14.2 Engineering Economics IV Reference: Lindeburg, Engineering Economic Analysis IRR Example – Winning the Lottery .With your recent streak of luck, you’ve decided to go out on a limb and purchase a Powerball ticket for this weekend’s lottery drawing. When buying the ticket you have the option to choose the one time cash payment ($177.3M) or the 30 annuity payments ($365M). In order to decide, you choose to figure out what interest rate the lottery is getting and whether or not you can find a better interest rate on your own. What is the internal rate of return for the lottery?P = Pa + A(P/A, ie,n) ( ) = ( ) + ( )(P/A, ie, ) ( ) = ( )(P/A, ie, ) ( ) / ( ) = (P/A, ie, ) = (P/A, ie, ) Falls between _______ % and _______ % but very close to 6% If you Interpolate: = _________ %
has intentionally blurred sections.
Sign up to view the full version.