At the Tuesday night league bowl, your bowling buddies, Bob and Bobbie Bobbitt (B³), told you that they had won a $4,000,000 million lottery jackpot and were going to claim the prize later that week.

On bowling night the following week, B³ were bummed when they told you that when they went to claim their prize, the net after-tax lump sum distribution amount to be paid was only $2,261,430.30.

B³ said that the lottery official explained that the $4,000,000 referred to a series of 20 annual payments of $200,000 beginning immediately, not a lump sum. The official also explained that they were required to deduct 20% of the lump sum payout for Federal Income Tax before making the distribution.

You have been telling B³ how much you enjoy the course Fundamentals of Corporate Finance. Therefore, B³ thought you might be able to help them understand how their $4,000,000 winning became only $2,261,430.30.

How would you explain this to B³?

This requires at least two computations to answer.