Winner of the powerball lottery will receive a grand prize

Assignment Help Financial Management

Reference no: EM131013124

Suppose it was announced this morning that the winner of the Powerball lottery will receive a Grand Prize of $73.7 million.

However, the winner will not get to collect $73.7 million in cash. Instead, the winner is offered two options.

1. Collect the prize in 25 annual payments of $2.948 million each (before-tax) or

2. Take a one-time lump sum payment of $41.4 million (before-tax) now.

For this exercise, assume that you are an esteemed financial planner and the Prize Winner has approached you for advice. The winner wants to know, should he or she take the 25 payments of $2.948 million each, or should he or she take the $41.4 million lump sum payment?

What would you advise the winner to do and why? Remember, the quality of your answer determines the size of your fat financial planner fee

Reference no: EM131013124

Questions Cloud

About the periodic inventory system : Determine the missing amounts assuming that this company uses the periodic inventory system. 2014 2015 2016 Sales $290,000 $ ? $410,000 Sales returns & allowances 11,000 13,000 ? Net sales ? 347,000 ? Beginning inventory 20,000 32,000 ? Ending invent..

The securitys marketability and liquidity : What is an IPO, and what role does an investment banker play in the process? Suppose you own a security that you know can be easily sold in the secondary market, but the security will sell at a lower price than you paid for it. What would this mean f..

Company depreciation and amortization expense : Trevi Corporation recently reported an EBITDA of $32,800 and $9,500 of net income. The company has $6,800 interest expense, and the corporate tax rate is 35 percent. What was the company’s depreciation and amortization expense?

Difference between science and religion : Parents and politicians in some school districts in the U.S. want creationism or intelligent design to be taught in science classes as theories that are as justified as evolution, and they think the students themselves should be given the choice to d..

Winner of the powerball lottery will receive a grand prize : Suppose it was announced this morning that the winner of the Powerball lottery will receive a Grand Prize of $73.7 million. However, the winner will not get to collect $73.7 million in cash. Instead, the winner is offered two options. The winner want..

What is yield-to-maturity of debt and expectded return : Gladstone Corporation is about to launch a new product. Depending on the success of the new product, Gladstone may have one of four values next year: $150 million, $135 million, $95 million, or $80 million. What is the initial value of Gladstone’s eq..

Which portfolio seems to have lower risk : Calculate the risk of the portfolio (the standard deviation) composed of Vanguard 500 and California REIT for portfolio weights ranging from 0% to 100%, including 1% in California REIT; do the same for the portfolio composed of Vanguard and Brown, ba..

What is the zero rate with continuous compounding : The annual continuously compounded 6-month and 1-year zero rates are 3% and 4%, respectively. A 1.5-year bond that pays coupons of $2 every six months currently sells for $98.52. What is the 1.5-year zero rate with continuous compounding? Show detail..

What is the price-weighted return for the index : Assume the following information concerning two stocks that make up an index. What is the price-weighted return for the index?

User Account

All Pages