Homework Answers
| Lump sum payout | 271678 | =512600*(1-47%) |
| Annuity: | ||
| Net payment after taxes | 27676 | =37400*(1-26%) |
| X PV factor | 9.95011 | =1+(1-(1.09)^-19)/0.09 |
| Present value of annuity payout | 275379 | |
| Annuity payout should be chosen |
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Problem 6-4 Tony Long has just learned he has won a $512,600 prize in the lottery....
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Steve Long has just learned he has won a $511,700 prize in the lottery. The lottery has given him two options for receiving the payments. (1) If Steve takes all the money today, the state and federal governments will deduct taxes at a rate of 47% immediately. (2) Alternatively, the lottery offers Steve a payout of 20 equal payments of $42,100 with the first payment occurring when Steve turns in the winning ticket. Steve will be taxed on each of...
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Need help with Option 3 & 4 please
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