Which option should chris choose and why

Reference no: EM131913051

Problem

You may use your financial calculator or excel for calculations but be sure to show your work (i.e. rate, periods, payments, etc.). For the amortization schedules be sure to print the schedule so all columns fit on one page.

1. Chris Hogan just found out he won $1,000,000 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 $72,000 with the first payment occurring when Chris turns in the winning ticket. Each of these payments will be taxed at a combined state and federal rate of 27%. Assuming Chris can earn a 4% rate of return on any money invested during this period, which option should he choose? Why?

Reference no: EM131913051

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