What amount would you accept today, as a lump sum payment, if you won the lottery for $177 million and they gave you the option of the lump-sum payment or 19 equal annual installments? Your marginal tax rate is 32%, and you are able to invest a lump-sum at a 6% annual rate.
2007-03-05 20:04:25 · 5 answers · asked by yyy_ans 1 in Business & Finance ➔ Personal Finance
$103.9million
=PV(0.06,19,-177000000/19)
You can pretty much forget about the tax rate because it would be a wash. You will pay taxes no matter what.
2007-03-06 16:33:35 · answer #1 · answered by JJ 5 · 0⤊ 1⤋
Although you are wasting time asking this question and I am wasting my time answering it, the real reason to take the lump sum vs annual is not directly in the math.
You should take the lump sum because if you pass away your heirs will not get the rest of the money due to you. The amount you would have got from the lump sum is simply put into an annuity and paid out annually. That is how the lottery does it.
Annual lottery payments are non-transferable.
If you take the lump sum, you can buy your own annuity and pay yourself out of it, but the annuity can also be owned by a trust which you can leave to your heirs.
2007-03-06 11:16:17 · answer #2 · answered by Ethan 3 · 0⤊ 0⤋
If you win that kind of money, you can afford the best tax accountants to figure how to make the best of of it. Using Excel to work out would be very bad advice. Unless you want somebody to help you with your homework. And giving you the answer is also a bad idea since it waste your teacher's time and effort trying to teach you something useful.
2007-03-07 01:53:26 · answer #3 · answered by unnga 6 · 0⤊ 0⤋
take the lump sum then marry me!
2007-03-06 05:50:12 · answer #4 · answered by Anonymous · 0⤊ 0⤋
I'd take about 121M. But I'm not sure so you do your own homework!
2007-03-06 04:44:44 · answer #5 · answered by teehee 3 · 0⤊ 0⤋