You recently won the super jackpot in the Set For Life Lottery. As you read the thumbnails, you discover that you have the below two options:

1. You will receive a 30-year payment of $270,000, with the first payment made today. Income will be taxed at 30 percent. Taxes will be withheld when checks are issued.
2. You will now receive $550,000 and you will not have to pay taxes on this amount. You will also receive $220,000 each year for 29 years starting one year from today. Cash flows from this annual income will be taxed at 30 percent.
3. 
   
4. Required:

What is the present value of your earnings, using a 6 percent discount rate?

 (Do not round up intermediate calculations and round your answers to 2 decimal places)

Answer rating: 100% (QA)

To find the present value of each option we need to calculate the presen... View the full answer