Suppose you win the lottery when the jackpot amount is $162 million. You can receive the...

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Accounting

Suppose you win the lottery when the jackpot amount is $162million. You can receive the jackpot amount paid out evenly over 26years or you can elect to take an immediate payment of $95 million,before taxes. Ignore all tax effects. Considering this scenario,which option is most advantageous and why? (Be specific as to anycalculations performed.) What other factors should be considered inmaking your decision?
Important Note: Please be sure your response is based on ourcourse concepts: the time value of money. Your post should includecalculations for both payout options using the time value of money,explain your assumptions, and interpret the results of yourcalculations. You may also discuss any and all other factors thatwill impact the decision as to which type of payout option youwould choose but only after you have completed the calculationsnecessary to support your response.

Answer & Explanation Solved by verified expert

3.6 Ratings (456 Votes)

Period Amount PV Factor PV million 1 1InterestPeriod Amount X PV Factor 1 6231 095 593 2 6231 091 565 3 6231 086 538 4 6231 082 513 5 6231 078 488 6 6231 073 452 7 6231 069 428 8 6231 065 406 9 6231 062 385 10 6231 059 365 11 6231 053 328 12 6231 050 310 13 See Answer

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