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Discuss return on any money invested during this period

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Reference no: EM131776144

Brad Whitaker just found out he won $2,500,000 from the lottery. He has two options for receiving the prize. First, if he takes the money today, the state and federal government will take out 47% immediately. His second option is to receive a payout of 20 equal installments of $145,000 with the first payment occurring when Brad turns in the winning ticket. Each of these payments will be taxed at a combined state and federal rate of 27%. Assuming Brad can earn a 4% rate of return on any money invested during this period, which option should he choose? Why? Show your work.

Reference no: EM131776144

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