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In 2004, a Massachusetts woman won 5.6 million dollars in the lottery, which would have paid her an initial gross payment of $283,770 and 19 more yearly payments of $280,000. Instead she sued the lottery commission for a lump-sum payment. Louise Outing is 94 years old, and she knew it would be foolish to expect to live another 20. So the lottery winner wants all of her cash now, not in payments spread out over the next two decades.(First payment is at the time of the claim and the other payments are 1, 2, 3, etc. from that time.) ''In March, I will be 95 years old. Do you realize that? Ninety-five in March," the Everett woman said in a telephone interview yesterday. ''Now, you know I'm not going to live 20 years. "Outing won the Sept. 4 Megabucks drawing, and she wants the Massachusetts State Lottery Commission to cut her a check immediately for the full $5.6 million, minus taxes. But the commission has so far rejected that request, saying Megabucks winners get 20-year annuities, not lump-sum payments. Ticket sales were 4 million dollars. Assume an interest rate of 10%. a. How much money the lottery commission will end up in their bank immediately after they pay the last payment of $280,000 to Ms. Outing. b. If the commission decide to pay Ms. Outing a lump sum, how much will that be? (Hint: initial payment plus the present value of the 19 payments).
Consider the following social welfare function for a small community of five people. SW = Ua(Na, Ca, C~a, Pa) + Ub(Nb, Cb, C~b, Pb) + Uc(Nc, Cc, C~c, Pc) + Ud(Nd, Cd, C~d, Pd) + Ue(Ne, Ce, C~e, Pe) where: N = noncompetitive goods C = competitive good..
Price controls are government restrictions on prices charged for goods and services in the market. Government policies regulating prices can be controversial because they keep prices artificially low and can cause shortages. How do price ceilings for..
A construction manager just starting in private practice needs a van to carry crew and equipment. She can lease a used van for $2,700 per year, paid at the beginning of each year, in which case maintenance is provide. Alternatively, she can buy a use..
Explain what happens to the elasticity of demand for labor in a given industry after which of the following events: A new manufacturing technique makes capital easier to substitute for labor. There is an increase in the number of substitutes for the ..
Select all of the following that would tend to have lower price elasticity of demand.
A firm has estimated the following demand function for its product: Q = 8 - 2P + 0.101I + A where Q is quantity demanded per month in thousands, P is the product price, calculate values for quantity demanded, price elasticity of demand, income elasti..
q.specialty steel has carefully measured production in its new plant to determine whether it is technically efficient
New six speed automatic transmission for automobiles offers an estimated 4% improvement in fuel economy compared to the traditional four-speed transmissions in front wheel drive cars. If a four-speed transmission car averages 30 miles per gallon and ..
What is fiscal policy? What are the fiscal policy tools available to the government? Explain and show graphically the impact of fiscal policy on equilibrium real income and interest rates. What is the government's budget equation? What is Crowding Ou..
In the aftermath of the global economic crisis that started to take hold in 2008, U.S. government budget deficits increased dramatically, yet interest rates on U.S. Treasury debt fell sharply and stayed low for quite some time. Does this make sense? ..
Jay Boville Corporation is being sued by Lark Dent. Lark Dent can settle out of court and win $40,000 or go to court. If Lark goes to court, there is a 30% chance that she will win the case. If she wins, a small and a large settlement are equally lik..
q1. a express total profits pi in terms of q.b elucidate total profits maximized at which level of output? what price
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