VID Mr. Mikell just won the $7 million lottery and has to choose between a lump...

 

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VID Mr. Mikell just won the $7 million lottery and has to choose between a lump sum payment (cash value = 49.53% of jackpot) or 26 annual graduated payments. The annual graduated payments would payout 2.5 % of the jackpot immediately with the second payment of $189,000 the following year. The remaining payments over the next 25 years would gradually increase by $7,000 to a final payment of $357,000. If the federal government treasury rate is 4.5% at the time of winning, what would be the equivalent cash value (PW) for this option (using interpolation to find factors)? Which payout method would you choose and why based on the analysis? (10pts) VID Mr. Mikell just won the $7 million lottery and has to choose between a lump sum payment (cash value = 49.53% of jackpot) or 26 annual graduated payments. The annual graduated payments would payout 2.5 % of the jackpot immediately with the second payment of $189,000 the following year. The remaining payments over the next 25 years would gradually increase by $7,000 to a final payment of $357,000. If the federal government treasury rate is 4.5% at the time of winning, what would be the equivalent cash value (PW) for this option (using interpolation to find factors)? Which payout method would you choose and why based on the analysis? (10pts)

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Lottery amt jackpot value 70000000 Cash value Option 1 ... View the full answer