Purchase the lottery ticket with before tax money

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Reference no: EM131235620

It is not uncommon for individuals to forget about taxes, especially when investments are small and payoffs are large but rare.

Say you are in the 30% tax bracket.

Is the NPV of a $1 lottery ticket that pays off taxable winnings of $10 million with a chance of 1 in 9 million positive or negative? How would it change if you could purchase the lottery ticket with before-tax money?

Reference no: EM131235620

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