Essay
IN THE TEXT
-O'Reilly is a masterful lottery player.The megamillion jackpot is now up to $200 million.If O'Reilly wins the jackpot,he has a choice of receiving $200 million in 5 years or a smaller lump sum 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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