#13. You recently won the super jackpot lottery. You discover that you have the following two...

#13. You recently won the super jackpot lottery. You discover that you have the following two options: (a) You receive 31 annual payments of $160,000, with the first payment being delivered today. The income will be taxed at a rate of 28 percent. Taxes are withheld when the checks are issued. (b) You receive $446,000 now, and you will not have to pay tax on this amount. In addition, beginning one year from today you will receive $101,055 each year for 30 years. The cash flows from these future payments will be taxed at a rate of 28 percent. Using a discount rate of 10 percent, which option should you select?

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Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 4 days ago

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