Consider a lottery ticket which costs $1 and has a probability of winning equal to 146 million to 1. Assume that a lottery winner receives a single lump-sum payment one year after they win and the government takes 25% of the winnings. If the discount rate (annual) for the after-tax cashflow is 5% what is the smallest lottery jackpot that makes purchasing a lottery ticket a positive NPV project?
Consider a lottery ticket which costs $1 and has a probability of winning equal to 146 million to 1. Assume that a lottery winner receives a single lump-sum payment one year after they win and the government takes 25% of the winnings. If the discount rate (annual) for the after-tax cashflow is 5% what is the smallest lottery jackpot that makes purchasing a lottery ticket a positive NPV project?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Consider a lottery ticket which costs $1 and has a probability of winning equal to 146 million to 1. Assume that a lottery winner receives a single lump-sum payment one year after they win and the government takes 25% of the winnings. If the discount rate (annual) for the after-tax cashflow is 5% what is the smallest lottery jackpot that makes purchasing a lottery ticket a positive NPV project?
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