Essay
O'Reilly is a masterful lottery player. The megamillion jackpot is now up to $200 million. IfO'Reilly wins the jackpot, he has a choice of receiving $200 million in 5 years or a smaller lumpsum currently. Advise O'Reilly on his choice under the following scenarios. Which option should he take and why? Use Exhibit 3.1. 
a. O'Reilly's after-tax return is 10%. If he chooses the current lump sum option, the lottery will pay him $130 million.b. O'Reilly's after-tax return is 10%. His current tax rate will be 35% if he receives the lottery payment now. His expected tax rate in five years will be 40%. If he chooses the current lump sum option, the lottery will pay him $100 million.
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(A) IF O'REILLY TAKES THE CURRENT LUMP S...View Answer
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