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43.
We are given the total PV of all four cash flows. If we find the PV of the three cash flows we
know, and
subtract them from the total PV, the amount left over must be the PV of the missing cash flow.
So, the PV of the cash
flows we know are:
PV of Year 1 CF: $1,700 / 1.10 = $1,545.45
PV of Year 3 CF: $2,100 / 1.10
3
= $1,577.76
PV of Year 4 CF: $2,800 / 1.10
4
= $1,912.44
So, the PV of the missing CF is:
$6,550 – 1,545.45 – 1,577.76 – 1,912.44 = $1,514.35
The question asks for the value of the cash flow in Year 2, so we must find the future value of
this amount. The value
of the missing CF is:
$1,514.35(1.10)
2
= $1,832.36
44.
To solve this problem, we simply need to find the PV of each lump sum and add them
together. It is important to
note that the first cash flow of $1 million occurs today, so we do not need to discount that cash
flow. The PV of the
lottery winnings is:
PV
=
$1,000,000 + $1,500,000/1.09 + $2,000,000/1.09
2
+ $2,500,000/1.09
3
+ $3,000,000/1.09
4
+ $3,500,000/1.09
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 Spring '08
 spurlin

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