I solved the problem, but please put the information you provided in an excel spreadsheet to get the answers I have please and explain the steps/formula used. 1. John won a $45 million lottery today. The payout is the following: John gets $1.5 million today and $1.5 million each year for the next 29 years. How much money worth today for the lottery assuming John’s federal tax rate is 39.6%, state tax is 8.5% and his annual discount rate is 12%? Annual Discount Rate = 12% Annual Income = 1.5 million Annual Federal Tax = 39.6% * 1.5 million = 0.594 million Annual State Tax = 8.5% * 1.5 million = 0.1275 million Annual Net Income = 1.5 million - 0.594 million - 0.1275 million = 0.7785 million Calculate Total Present Value by using the PVOA Formula. Annuity Factor i = 12% ; time = 29 years ; Factor = 8.0218 PVOA = PMT x Annuity Factor = 0.7785 x 8.0218 = 6.244971 million Total PV = Initial Net Income + PVOA = 0.7785 million + 6.244971 million = 7.02 million
I solved the problem, but please put the information you provided in an excel spreadsheet to get the answers I have please and explain the steps/formula used.
1. John won a $45 million lottery today. The payout is the following: John gets $1.5 million today and $1.5 million each year for the next 29 years. How much money worth today for the lottery assuming John’s federal tax rate is 39.6%, state tax is 8.5% and his annual discount rate is 12%?
Annual Discount Rate = 12%
Annual Income = 1.5 million
Annual Federal Tax = 39.6% * 1.5 million = 0.594 million
Annual State Tax = 8.5% * 1.5 million = 0.1275 million
Annual Net Income = 1.5 million - 0.594 million - 0.1275 million = 0.7785 million
Calculate Total Present Value by using the PVOA Formula.
PVOA = PMT x Annuity Factor = 0.7785 x 8.0218 = 6.244971 million
Total PV = Initial Net Income + PVOA = 0.7785 million + 6.244971 million = 7.02 million
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