Lucky Louie just won the lottery!! He has a choice of taking $1,000,000 in cash or receiving $50,000 per year for 30 years beginning at the end of this year.The best way to make this choice is to
A) consult a tax advisor.
B) consult an oracle.
C) calculate the future value of the annuity payments.
D) calculate the present value of the annuity payments.

Question

Quizplus · Accepted Answer

The best way to make this choice is to calculate the present value of the annuity payments. This will allow Lucky Louie to compare the value of the lump sum payment to the value of the annuity payments. It is important to consider factors such as inflation, taxes, and investment opportunities in order to make an informed decision. A tax advisor may also be helpful in determining the tax implications of each option. Consulting an oracle is not a reliable method for making a financial decision. Calculating the future value of the annuity payments does not take into account the time value of money and may not provide an accurate comparison to the lump sum payment.

Lucky Louie Just Won the Lottery!! He Has a Choice