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The cash flows from this annuity will be taxed at 28

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You have recently won the super jackpot in the Washington State Lottery. On reading the fine print, you discover that you have the following two options: a. You will receive 31 annual payments of $160,000, with the first payment being delivered today. The income will be taxed at a rate of 28 percent. Taxes will be withheld when the checks are issued. b. You will receive $446,000 now, and you will not have to pay taxes on this amount. In addition, beginning one year from today, you will receive $101,055 each year for 30 years. The cash flows from this annuity will be taxed at 28 percent. Using a discount rate of 10 percent, which option should you select?

Reference no: EM13575688

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