Reese Feldman just found out he won $2,500,000 from the lottery. He has two options for...

Reese Feldman just found out he won $2,500,000 from the lottery. He has two options for receiving the prize. First, if he takes the money today, the state and federal government will take out 40% immediately. His second option is to receive a payout of 20 equal installments of $145,000 with the first payment occurring when Reese turns in the winning ticket. Each of these payments will be taxed at a combined state and federal rate of 27%. Assuming Reese can earn a 3% rate of return on any money invested during this period, which option should he choose? Why? Show your work

Expert Solution

ekkarill92 answered 1 year ago

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