Taxes and interest on lottery winnings

Question

$100,000 a year for the next 10years 10 year interest rate are 5% with a current tax on lottery winnings of 40%? What is the amount you will receive today with lump sum option?

Answer 1

So if you are looking at a lump sum option of a $1,000,000 lottery winning, it would be your $1M less the 40% in taxes. Leaving you with $600,000

this in in comparison to the Present Value of annuity payments over 10 years

PMT 100,000

n=10

I=5%

PVA 772,173. 49

I used a financial calculator. You can also use the PVA table which gives you a factor of 7.7217

so 100,000 X 7.7217 = 772,170