Question

After years of playing the lottery, you just won $10,000,000. Now, you have to figure out how you want it paid to you. You can take a lump sum now before tax, (yes, Uncle Sam will eventually get his part), or you can take annual payments at the end of each year (also before tax). The interest rate is 4% and if you do take the payments, they will be paid over 20 years.

1) What is the lump sum payment that you would receive today?

2) How much would you have received in total at the end of the 20 years if you took the payments?

Answer 1

Answer:

1) 446,400

2) 8,928,00

if you take the 10 million dollars and divided by 20 then minus your 4% interest and you 7% tax you will get 446,400 a year and a few times that by the number of years you're getting it (20years) You will end up with 8,928,000

hope that helps