Congratulations! You are the sole winner of the $10 million jackpot lottery. You can choose to take the lump sum option of $2.75 million today (after taxes) or accept 20 annual payments of $250,000 (also after taxes). Assume an annual interest rate of 6%. This is a Present Value to Present Value comparison. We know the present value of a lump sum payment is 2.75 million. Using the Finance Calculator, what is the present value of all the annual payments combined over those 20 years?
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- Assume you win a lottery, and you are offered the following stream of payments by the lottery commission: $25,000 today, $32,000 one year from now, another $32,000 two years from now, and a final payment of $55,000 three years from now. You accept the offer. If you invest all of these proceeds at 6% compounded annually and extract nothing from the investment, how much will you have at the end of the fourth year? Excel Formula PleaseYo have won the lottery. $250 million was the grand prize which will be paid in equal instalments over the next 25 years (so payments of $10 million per year, starting today). You also have the option to take a lump sum immediately which will be calculated based on the above payout using a discount rate of 6%. Assume that you have to pay a 50% tax rate on your prize, what is your resulting payout (after tax)? Hint: Calculate the PV of the annuity due the multiply by 0.50 (that will give you the after tax lump sum)The winner of a lottery is given a choice of $1,000,000 cash today or $2,000,000 paid out as follows: $100,000 cash per year for 20 years with the first payment today and 19 subsequent annual payments thereafter. The inflation rate is expected to be constant at 4%/yr over the award period and the winner’s TVOM (real interest rate) is 3.5%/yr. Solve, a. Which choice is better for the winner? Neglect the effect of taxes, life span, and uncertainty. b. At what value of inflation are the two choices economically equivalent? c. What would you do if you do NOT neglect the effect of life span and uncertainty?
- You have just won 50 million in the lottery, payable in equal yearly installments over the next 20 years (first payment to be made immediately). Instead of taking the annual payments, you also have the option of receiving a lump sum amount immediately. If the interest rate is 6% per year, what is the minimum lump sum amount you would except in place for the payments? What if the interest rate is 10% per year? Please show the formula and answer.You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $450,000 per year. Thus, in one year, you can receive $1.45 million. In two years, you get $1.9 million, and so on. If the appropriate interest rate is 6.2 percent, what is the value of your winnings today? (Please also provide financial calculator calculations if possible)Assume you win a lottery, and you are offered the following stream of payments by the lottery commission: $25,000 today, $32,000 one year from now, another $32,000 two years from now, and a final payment of $55,000 three years from now. You accept the offer. If you invest all of these proceeds at 6% compounded annually and extract nothing from the investment, how much will you have at the end of the fourth year?
- you have just won the lottery and will receive $460,000 in one year. you will receive payments for 21 years, and the payments will increase 4 percent per year. if the appropriate discount rate is 11 percent, what is the present value of your winnings? Please explain how to solve using the financial calculator to show and explain steps thanksYou just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $700, 000 per year. Thus, in one year you receive $1.70 million. In two years, you get $2.40 million, and so on. If the appropriate discount rate is 8.0 percent, what is the value of your winnings today? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e. g., 1,234,567.89.)Assume you win a lottery that will pay you $10,000 immediately, plus $20,000 one year from now, $30,000 two years from now, $40,000 three years from now, and $75,000 four years from now. You’re curious about how much the lottery commission might offer you as an immediate lump sum instead. What is the minimum amount you should consider accepting today instead? Use a 5% annual discount rate. Please remember that we are ignoring taxation and other considerations and basing this only on the math itself.
- You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $660,000 per year. Thus, in one year, you receive $1.66 million. In two years you get $2.32 million, and so on. If the appropriate interest rate is 7.6 percent, what is the value of your winnings today?Assume you win a lottery, and you are offered the following stream of payments by the lottery commission: $25,000 today, $32,000 one year from now, another $32,000 two years from now, and a final payment of $55,000 three years from now. You accept the offer. If you invest all of these proceeds at 6% compounded annually and extract nothing from the investment, how much will you have at the end of the fourth year? (RESOURCE: Timing of Cash Flows) NOTE: You can use this equation FV=PV x (1+i)^n or in excel you can use =FV(RATE, NPER(1), 0, AMOUNT(1)), FV=(RATE, NPER(2),0,AMOUNT(2)...... Then add the totals of each rowSuppose you just won the state lottery, and you have a choice between receiving $3,600,000 today or a 20-year annuity of $250,000, with the first payment coming one year from today. What rate of return is built into the annuity? Disregard taxes.