Cancer victim wins million dollar lottery, but can't collect in lump sum to save him!

[levistep]

If I didn't screw up, and i probably did, the present value of a million over 20 years @ 5% interest is only 632k. If they made a lump sum offering, he'd lose 40% of that for taxes, so that's not even enough to pay for the surgery.

 

[TTinCO]

TTinCO, believe the terminology you're looking for is present value. They will pay him the full $1m, $50,000 per year for 20 years. The difference is that $1m today is worth a lot more than $1m in twenty years.

In fact, at 5% interest, $1m today is worth $2,712,640.29 in 20 years. That's why they don't pay the full amount if you request a lump sum payment.

Yeah, NPV(Net Present Value) is the term. Let me see if I work up the calculation.

 

[viking611]

A $1 Million prize paid out over 20 years is not $1 million. It's the NPV of the combined payments.

Where are the finance guys-my terminology may be a bit off-it's been quite a few years, beers & :bong: since those classes

i got ya...

 

[viking611]

can't find my financial calculator.

I'm guessing his ticket is worth about 200K based on about 8% interest earning.

 

[Kabbagecough]

That's messed up!

Why does the US not follow Canada's lead and not tax lottery winners? The G has already taken it's masssive cut on the take anyhow, right?

I think California takes about 50%. I'm glad they've carved out exceptions to anti-gambling laws for state lotteries. They're such an excellent wagering proposition.