This website uses cookies to ensure you have the best experience. Learn more

Lottery Winner Looks Can Be Deceptive

1321 words - 6 pages

Beijing University of Aeronautics and Astronautics, BUAA
Corporate Finance

Case Study
Lottery Winnings – Looks Can Be Deceptive!

Group Members:


Submitted to: Prof. BAI MING

Date of submit: 02/November/2015

An anonymous from Michigan has stepped forward as the winner of the most recent $181,5 million The Big Game Lottery. Lucky Guy! Now comes the hard part. But what happens when you actually win?

Normally the answer appears to be "take all the money up front immediately and subsequently squander every available penny on frivolous ...view middle of the document...

The annual payments come with a maximum assurance and may even be larger than you expected if the market does well.

2. If you decide to select the annuity option, how much money would you receive each year after taxes?

Under the annuity option, the winner is paid the advertised prize money in 26 equal parts after taxes are withheld. The calculation is as follows:

Before tax annuity= $ 181 500 000/26= $ 6 980 769, 23
After tax annuity = $ 6 980 769, 23 – 0,322($ 6 980 769, 23) = $ 4 732 961, 54

Where 0,322 is total tax rate (28% + 4.2%)

* 3. Is the State of Michigan justified in advertising the prize amount as $363 million? Explain.
On the one hand, we think that it is not really justified: the whole amount of the prize might be $363 million, but there is no warning about how it is divided in case of multiple winners. Apart from that, if the winner wants to take the prize in cash, he will just get the 50% of the whole amount (before taxes). To sum up, the prize amount is over stated.

On the other hand, we should realize that it is being used for the advertisements of the lottery: the state wants as many people as possible to join the game and therefore increase its own benefits. So, as a marketing campaign, to advertise the lottery using the higher prize amount can be justifiable.

* 4. If the only option available were an annuity payment plan, what could Larry do to maximize the value of his winnings assuming that the risk-free rate of interest is 5%. 

Larry could sell off the Annuity to the professional firms in exchange for a lump sum and then invest the money in buying stocks or bonds. Larry can face many different situations according the discount interest that professional firms will cut. Here are present value (or the amout of money that Larry could get selling his annuity and being charged with different rate). To calculate it the following formula was used:

PV=A*(1+i)N-1i*(1+i)N, where n=26, A=4 732 961, 54
Then we assuming that Lurry invests the lump sum he got from the firm with the annual interest rate of 11% for the same 26 years, we also assume that Larry's future income will be charged with 25% of income tax rate.

, where n=26, i=11%

RATE | PRESENT VALUE |       | Rate | Duration | Future Value | FV After Tax |
0,05 | 68037191,40 | | 0,11 | 26 | 1025991649,09 | 769493736,8 |
0,10 | 43358397,64 | | 0,11 | 26 | 653838775,25 | 490379081,4 |
0,15 | 30719588,28 | | 0,11 | 26 | 463247238,58 | 347435428,9 |
0,20 | 23458081,17 | | 0,11 | 26 | 353744693,08 | 265308519,8 |
0,30 | 15759338,41 | | 0,11 | 26 | 237648692,84 | 178236519,6 |

If Larry decided do not sell the anuuity he won and just invests the annuity with the 5%...

Other Papers Like Lottery Winner Looks Can Be Deceptive

The Lottery Essay

871 words - 4 pages faded and stained."Black is often associated with darkness and death. In addition, the black box is very old. Its old and blackness are served as an element foreshadowing the future death of an inhabitant. Another object in the story is the lottery tickets, the pieces of paper which are replaced the older wood chips in the lottery event. The slips of paper in this story represent the fragility and feebleness of life. This can be seen in the

Lit210 Final Essay

1783 words - 8 pages her husband was chosen as the winner. Tessie has lived her whole life with peer pressure making her think that the lottery was just a fun thing the town had always done. Tessie’s whole attitude changes regarding the lottery when she is ultimately named the winner, and she learns that peer pressure can sometimes lead you to a position that you never wanted to be in. She realizes that the lottery is not the light hearted tradition that it has been

The Lottery

794 words - 4 pages children and the children refused to listen, it was the men who were authoritative and got the children to obey. However, after the lots are drawn and the ‘winner’ has been selected, the men show no remorse or hesitation in killing the victim, whether they are of their own flesh and blood or friends. The lottery also shows a good amount of façade in society, which can be seen through Mrs. Delacroix’s character who was no different from the rest

Symbolism In The Lottery

1461 words - 6 pages highlight certain religious implications of the story. Jackson's feelings toward the misuse of tradition as an excuse to cause harm may have triggered her creativity for the creation of "The Lottery". The townspeople all came together for the annual lottery, however, in an interesting twist, those participating stone the winner to death. Everyone in the town seems horribly uncivilized yet they can easily be compared to today's society. After

The Rocking Horse vs Lottery

1014 words - 5 pages loses his life. “The Lottery,” by Shirley Jackson, is a short story of an annual tradition in which a small New England town randomly draws one person’s name to be the winner of the lottery. This lucky person will neither win money nor a special prize; instead are stoned to death by the rest of the community. This story gives a different meaning to the event called a lottery. D.H. Lawrence proves many points by using the following themes

Sacrificial Love

727 words - 3 pages Eva, make them take their chance” (285). In “The Rocking Horse Winner,” Hester is a woman who is very selfish and consumed by greed. Paul who is the son of Hester wants to help his mother financially by becoming lucky. In “The Lottery,” the author paints a totally different picture to the reader of what the “Lottery” is all about. In this short story of events the reader is lead to believe that there will be someone winning the lottery

Fiction Essay

1465 words - 6 pages death. When people hear the word “lottery”, their minds usually turn to positive things and most likely the chance of winning something such as money. The title “Rocking Horse Winner” would make readers think that this story would be about a child winning a rocking horse. From the simple titles alone, most readers would think that these stories would have a positive outcome. They both draw you completely in and turn out to have a much

Greed Intro Essay

671 words - 3 pages selfish desires which creates conflicts in personal relationships and society. The short stories The Rocking Horse Winner, D.H. Lawrence, The Lottery Ticket, Anton Chekhov and Twins, Eric Wright illustrate this truth. These three short stories clearly portray that greed destroys relationships, fosters materialism within society, and causes betrayals. Greed can destroy relationships to a point where two people detest each other. In The Rocking Horse

The Lottery

1083 words - 5 pages explains the exact purpose of the lottery, except that it is a tradition that has been around for a long time. The only character that hints to the purpose is Old Man Warner when he says, "Pack of crazy fools, listening to young folks, northing's good enough for them. Next thing you know, they'll be wanting to go back to living in caves, nobody work anymore, live that way for a while. Used to be a saying about 'Lottery in June, corn be heavy soon

The Lottery - 562 words

562 words - 3 pages ENGL 1302 Paper #1: Central Idea January 28, 2016 Word Count: 515 “The Lottery” In Shirley Jackson’s short story, The Lottery, you automatically begin to wonder what the “lottery” actually consists of. The story starts off on a nice day in June, June 27th to be exact. The kids are running around and the men and women are beginning to gather and wait for the lottery to take place. After everyone gathers, Mr. Summers and Mr. Graves join the

The Lottery vs the Most Dangerous Game

1185 words - 5 pages conduct. The narrator in “The Lottery” depicts the scenery as being nothing out of the ordinary. A day where the town’s people are gathering for what seems to be a typical social setting. While reading, one contemplates that the outcome will be positive, even based upon the title alone. However, when the story reaches a climax, the positive inclination instantly becomes negative because the winner of the lottery is supposed to be stoned to death

Related Essays

Looks Can Be Deceiving Essay

627 words - 3 pages looks can be deceiving Fat and grimy, short and slimy was Pankaj, the abominable school boy. Everyone grimaced when he prodded along the school corridors, even teachers. Very few went near and even fewer spoke to him. Pankaj had absolutely no friends and no guardian. He lived with his grandmother and played alone. Only because he looked a tad unlike other humans. He had hair all over his body and his face, an angular nose, his extra two

Fiction Essay

1821 words - 8 pages with the rest of society; in “The Rocking Horse Winner” family and friends can do all they can to help and still not be enough. In “The Lottery”, Jackson begins by setting the up the events that will inevitable come to pass. A few characters are introduced towards the beginning but who they are is not as important as their actions. Following the imagery of the location Jackson introduces Mr. Summers, one of the most prominent characters. As

Irony Analysis Of Shirley Jackson's The Lottery

646 words - 3 pages torn inside and add layers of depth where they are expecting a happy ending but rather receive an unpleasant surprise that leaves a certain “taste in their mouths” if you will. This can not only be seen as dramatic irony but as situational Irony because the readers expect the lottery to be enriching, but the exact opposite happens through the death of the lottery ‘winner’. The irony is also found in the story when Tessie Hutchinson is late to the

The Lottery Essay 1329 Words

1329 words - 6 pages Miller My two favorite short stories are “The Lottery and “Young Goodman Brown”. Making a decision which is better will be a tough choice. Although both stories are similar in its theme, it is transported differently in each story. The stories display different character analysis and word choice. I. My favorite pastime is reading short stories. a. Two stories I can read repeatedly. i. “The Lottery” by Shirley Jackson. ii