You have just won the Powerball Lottery with a jackpot of $329,000,000. No one else had the winning ticket so it's all yours! You remember taxes in your finance class and know that if you take a lump sum, it will cost you almost $122 million dollars. So, you elect to take the 25-year payout. Your winnings will be paid to you in 25 equal annual installments with the first payment made at the end of the year. If you feel the appropriate annual discount rate is 9%, what is the value to you of the $13,160,000 annual cash flow after 5 years into the payout?

You have just won the Powerball Lottery with a jackpot of $329,000,000. No one else had the winning ticket so it's all yours! You remember taxes in your finance class and know that if you take a lump sum, it will cost you almost $122 million dollars. So, you elect to take the 25-year payout. Your winnings will be paid to you in 25 equal annual installments with the first payment made at the end of the year. If you feel the appropriate annual discount rate is 9%, what is the value to you of the $13,160,000 annual cash flow after 5 years into the payout?

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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Similar questions

A lottery corporation sells a ticket for a chance to win $500,000. If you win, the prize winnings will be spread out over time with your first payment of $150,000 today. The second payment of $ 150,000 would be released to you in a year, and the last payment of $200,000 would be released the following year. If you could earn 3.5% compounded annually, what is the value of the prize today?
You just won the lottery! As your prize, you will receive $2,200 a month for 90 months. If you can earn 7 percent on your money, what is this prize worth to you today? $
You won the state lottery and took the payout as a $1,823,475 lump sum today. Your spouse has decided that you need to invest this money for the next 9 years and can expect it to earn an average annual rate of return of 8.00%. If this comes to pass, how much money will be in the account at the end of the period?
You just won a lottery that promises to pay you $1 million exactly 10 years from today. Because the $1 million payment is guaranteed by the state in which you live, opportunities exist to sell the claim today for an immediate lump-sum cash payment. What is the least you will sell your claim for if you could earn 5.05 % on similar-risk investments during the 10-year period?
Your friend just won the lottery. He has a choice of receiving $100, 000 at the end of each year for the next 30 years or a lump sum today. The lottery uses an 6% annual discount rate. What lump sum would your friend receive if he chose this option?
Your great aunt Marie just hit the $100 million jackpot in the state lottery and took a lump sum payment. She wants to share her good fortune with you by depositing $500,000 into an account that pays 5% interest. She has demanded that you leave the money in that account for 40 years until you are ready to retire. You expect to live for 25 years after you retire. Given the awesome jumpstart to your retirement account, you would like to be able to withdraw $350,000 per year at the end of each retirement year. To do this, you need to contribute to your retirement account at the end of every year until retirement. How much must you contribute to the account to reach your goal? Deposit approximately $11,696 per year. Deposit approximately $43,295 per year. Deposit approximately $39,156 per year. Deposit approximately $124,500 per year.
Your friend just won the lottery. He has the choice of receiving $50,000 a year for the next 20 years or a lump sum today. The lottery uses a 15% discount rate in determining its lump sum payout. What would be the lump sum your friend would receive, if he chooses that option?
Martin Holmes holds the winning ticket for the 69 million mega lottery. Now he needs to decide which alternative to choose: (1) a $44 million lump-sum payment today or (2) a payment of $3.3 million per year for 30 years. The first payment will be made today. If Martin’s opportunity cost is 7 percent, which alternative should he choose? Explain by showing your calculations.
You have just inherited $560,000. You plan to save this money and continue to live off the money that you are earning in your current job. If you can invest the money in a bond that pays 4.83 percent interest annually, how long will it be before your inheritance is worth $1 million? (If you solve this problem with algebra round intermediate calculations to 5 decimal places, in all cases round your final answer to 2 decimal places, e.g. 8.72.) Inheritance will be worth $1 million in years
Frank just won the lottery! Starting one year from now, he will recieve $66, 000 per year for the next 30 years. If the discount rate is 9%, what is the value of his winnings?
You just accepted an offer from XYZ Petrochemical Company in Louisiana. As a sign up bonus, the XYZ will deposit $10,000 in a retirement account for you which generates 12% return annually. In addition, the company deposits $5,000 every year in the same account, if you stays with XYZ. How much money will be accumulated in this account if you decide to retire 40 years from now?
Jane won the $70 million lottery. She is to receive $1 million a year for the next 50 years beginning one year from now, plus an additional lump sum payment of $10 million after 50 years. The discount rate is 10 percent. How much cash would she need to be offered today to tempt her to take a lump-sum cash offer instead, all things equal? Please show all your work.

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