You have won the ny state lottery. the prize is $100,000,000, which is determined by 20 annual payments of $5,000,000. you can either accept the 20 annual payments of $5,000,000 or take an upfront, pre tax payment of $60,000,000. either decision entails paying taxes of 40% when you receive the money and we assume that the tax rate will not change in the future. what would you do and why? on an after tax basis in today’s dollars, how much richer are you now? answers must include an analysis using pv and irr. risk assessment - appropriate discount rates us government 2% ny state/city 4% venezuela15% restaurants30% you can collaborate but you must individually write and submit your own analysis.

The annual payment have a better present value. It is $40,770,979 to $36,000,000.

After tax-basis we are $40,770,979 more richier

IRR for the prize 5.45%

Explanation:

we will use the NY state discount rate:

60,000,000 x (1- 40%) = 36,000,000 after-tax

second option:

5,000,000 x (1-40%) = 3,000,000 after-tax

we calculate the present value of a 20 year annuity for 5,000,000 dollars with a 4% discount rate.

C3,000,000

time20

rate0.04

PV$40,770,979.0349

As this option is better than the upfront payment, it is better to take the annual payment.

We can determinate the real rate of return

We consider 60,000,000 upfront against 20 payment of 5,000,000 the rate will be calcualte with goal seek excel tool or trial and error manually:

C5,000,000

time20

PV$60,000,000.0000

rate= 0.05450114 = 5.45%

notice: that with this rate if we apply the tax rate we got the same rate:

C3,000,000

time20

PV$36,000,000.0000

rate= 0.05450114 = 5.45%

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.