You have just won the lottery and will receive $540,000 as your first payment one year from now. you will receive payments for 26 years. The payments will increase in value by 4 percent each year. The appropriate discount rate is 10 percent. What is the present value of your winnings?
4% = 0.04
540K * (1 + 4%)^26 = 540K * (1.04)^26 = $1,497,133.68
I just paid off my student loans, credit cards, 2 new cars, and my mortgage.
I don't need the discount, but thanks anyway.