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6. Congratulations! You have just won the State Lottery. The lottery prizewas advertised as an...

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Finance

6. Congratulations! You have just won the State Lottery. The lottery prizewas advertised as an annuitized $245 million paid out in 30 equal annual payments beginning immediately. The annual payment is determined bydividing the advertised prize by the number of payments. You now have up to 60 days to determine whether to take the cash prize or the annuity.

c. Now suppose that, as many lotteries do, the annuitized cash flows willgrow by 3% per year to keep up with inflation, but they still add up to$245 million. In this case, the first payment will be $5,149,718.53today. If you took the cash prize instead, how much would you receive(before taxes)?

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