Purchase Solution

Lottery winnings taken as a lump sum or over a period of time

Not what you're looking for?

Ask Custom Question

Lottery winnings to be taken as a lump sum of $112,000 cash or $35,000 plus $6000 for the next 40 years. What issues are considered when weighing the options?

You have to consider the PV of the annuity and also FV for the payment over the years, is that an approach to figure out the best option? If you took the sum of $112,000 and invested it you would have to take into consideration a % of what the money would earn over the 40 years. Or would you be better off spreading it? What is the formula I would use to calculate the amount you would make over the 40 years.

Purchase this Solution
Solution Summary

Both the through present and future value options are evaluated for lottery winnings.

Solution Preview

There are 2 options here for evaluation:

(1) Through Present Value (PV)
In this case, we need to compare 112,000 (lump sum - value today) with the sum of 35,000 and PV of an ...

Purchase this Solution
Free BrainMass Quizzes
Basics of corporate finance

These questions will test you on your knowledge of finance.

Operations Management

This quiz tests a student's knowledge about Operations Management

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

View More Free Quizzes
Related BrainMass Solutions

  • Tax Implications of Lottery Winnings

    Winnings from a lottery are an example of a windfall income and subject to tax. The amount of taxes the winner needs to pay depends on which method he prefers to receive the winnings by: lump sum or installment.

  • Winning the Lottery

    Your winnings are: Lottery total $36,800,000 Discount rate 7% # Payments 20 Payments per yr. $1,840,000 If you could choose a lump sum of $20,000,000 or payments which would you choose and why?

  • Three choices for lottery winnings: lump sum, ordinary annuity, annuity due

    38952 Lottery winnings: lump sum, ordinary annuity, annuity due 4. You have just won the lottery and you have three choices to choose from as to how you will receive your winnings.

  • Managerial Finance

    An annuity is a series of annual payments (usually of equal size) over some period of time.

  • Present value

    198964 Present value Rita Gonzales won the $60 million lottery. She is to receive $1 million a year for the next 50 years plus an additional lump sum payment of $10 million after 50 years.

  • Coupons, Lottery and Debt

    She is to receive $1 million a year for the next 50 years plus an additional lump sum of $10 million after the 50th year. The discount rate is 10%. What is the present value of her winnings? 3.

  • Lump sum or an annuity

    An annuity is a series of annual payments (usually of equal size) over some period of time.

  • Calculate maximum lump sum amount for future payments

    284334 Calculate maximum lump sum amount for future payments Assume I won the 100 million dollars in a lottery that paid installments of 20 million dollars a year for five payments or a lump sum payment.

  • State Lottery

    Your prize can be taken either in the form of $40,000 at the end of each of the next 25 years (i.e., $1 million over 25 years) or as a lump sum of $500,000 paid immediately. a.

View More Related Solutions