You have recently won the super jackpot in the Washington State Lottery. On reading the...
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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 will receive 30 annual payments of $150,000, with the first payment being delivered today. The income will be taxed at a rate of 30 percent. Taxes will be withheld when the checks are issued. |
| b. | You will receive $600,000 now, and you will not have to pay taxes on this amount. In addition, beginning one year from today, you will receive $100,000 each year for 29 years. The cash flows from this annuity will be taxed at 30 percent. |
| Using a discount rate of 6 percent, what is the present value of your winnings? (Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) |
| Present value of Option A | $ |
| Present value of Option B | $ |
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