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You work for the Powerball Lottery Commission. It is your task to figure out what is...

You work for the Powerball Lottery Commission. It is your task to figure out what is a fair lump sum offer to make to Dylan, the $2 billion lottery winner. Using an annual interest rate of 5% and annual payments for 30 years, what is a fair lump sum offer you would make to Dylan?

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Answer #1

Annual payment : 2,000,000,000/30 =66,666,666.6666

Fair value of lump sum offer =PVA5%,30 *Annual payment

                  = 15.37245* 66,666,666.6666

                  = $ 1,024,830,000 or 1.02483 billion

**Assuming annual payment are made at end of each year .

**Find present value annuity factor using financial calculator or from annuity table at 5%

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