You just won the $20,000,000 lottery price. Either you can take the annual payments of $1,000,000...
You just won the $20,000,000 lottery price. Either you can take the annual payments of $1,000,000 per year for 20 years or you can elect to receive a lump sum value of the annual payments using a discount rate of 6%. You have elected to receive the lump sum amount. What is the net lump sum amount you will received after applying Federal and State Income Taxes; 25% and 12% respectively. What is the Net Lump Sum distributed after taxes?
|
A. $11, 469,921 |
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|
B. $4,243,871 |
||
|
C. $7,226,050 |
Homework Answers
| Winnings | $ 20,000,000 |
| PV @ 6% | 0.94340 |
| Lump Sum Pv @ | $ 18,867,925 |
| Federal Tax @ 25% | $ 4,716,981 |
| State Tax @ 12% | $ 2,264,151 |
| Net Lump Sum | $ 11,886,792 |
| Winnings | 20000000 |
| PV @ 6% | =1/(1+6%)^1 |
| Lump Sum Pv @ | =C2*C3 |
| Federal Tax @ 25% | =C4*25% |
| State Tax @ 12% | =C4*12% |
| Net Lump Sum | =C4-C5-C6 |
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