You have recently won the super jackpot in the Washington state lottery. On reading the fine...

 

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You have recently won the super jackpot in the Washington state lottery. On reading the fine print, 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 taxes on this amount. In addition, beginning one year from today, you will receive $101,055 each year for 30 years. The cash flows from this annuity will be taxed at 28 percent. Using a discount rate of 10 percent, which option should you select? You have recently won the super jackpot in the Washington state lottery. On reading the fine print, 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 taxes on this amount. In addition, beginning one year from today, you will receive $101,055 each year for 30 years. The cash flows from this annuity will be taxed at 28 percent. Using a discount rate of 10 percent, which option should you select?

Answer rating: 100% (QA)

Select Option a OPTION a had a present value of 120118055 O... View the full answer