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You have won the NY State Lottery. The prize is $100,000,000, which is determined by...

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Finance

You have won the NY State Lottery. The prize is $100,000,000, which is determined by 20 annual payments of $5,000,000. You can either accept the 20 annual payments of $5,000,000 or take an upfront, pre tax payment of $60,000,000. Either decision entails paying taxes of 40% when you receive the money and we assume that the tax rate will not change in the future. What would you do and why? On an after tax basis in todays dollars, how much richer are you now? Answers must include an analysis using PV and IRR.

RISK ASSESSMENT - appropriate discount rates

US Government 2%

NY State/City 4%

Venezuela 15%

Restaurants 30%

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