Please help me solve this Finance question...your opinions help! Thank you so much?
I know it may be alittle long..but please help me, I really appreciate it! Thanks to all the kind people on Yahoo Answers! Totals: 1972 Start-up through FY 2000* Total Lottery Ticket Sales $25.12 billion Net Revenue to Aid Education $9.83 billion Retailer Commissions $1.68 billion Prizes to Players$12.86 billion *http://www.Michigan.gov/lottery The Big Game is a multi-state lottery game with BIG Jackpots.Seven states participate in The Big Game: Georgia, Illinois, Maryland, Massachusetts, Michigan, New Jersey and Virginia. By teaming up together, the member lotteries are able to offer players jackpots that start at $5 million. The jackpots grow until someone wins. Jackpots can grow as high as $200 million or more. In fact, The Big Game holds the record for the largest lottery jackpot ever in the United States: $363million! This jackpot rolled 18 times since last being hit! Two winning tickets -- one sold in Michigan, and one sold in Illinois -- matched all six numbers in this Big Game drawing, each worth an annuitized value of $181.5 million. The winners were Larry and Nancy Ross of Shelby Township, Michigan, and Joe and Sue Kainz of Lake County, Illinois.The Michigan Lottery can pay Big Game jackpot winnings inone of two ways: as an annuity or in one lump-sum/cash-option payment for the present cash value of the jackpot share. When a winnerselects annuity payments, the jackpot is paid out in equal installments over 26 years. When a winner selects the cash option, the Lottery paysthe winner the present cash value of the announced jackpot in onelump-sum payment, which is typically about 50% of the publishedvalue. In effect, the Lottery takes all of the money that would have been invested to fund the 26-year annuity and turns it all over to the winner, retaining absolutely none of the prize. Regardless of which option thewinner selects, the Michigan Lottery is required by law to withholdestimated income taxes for federal (28 percent) and state (4.2 percent), on any prize over $5,000. These amounts are estimates only, and the winner is required to satisfy any further tax liability for the year inwhich the prize award is claimed. -------------------------------------------------------------------------------- Q1) Why do most winners select the cash option plan when given a choice? Q2) If Michigan Lottery would like to give the annuity option an equal chance of being selected, how would it have to structure its payments?
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- Answer for Q1, you choose the lump sum option because you'll have the cash in your hand immediately.... im not gonna answer it anymore because its a really basic accounting/finance question.
