Fed Taxes 2021

Bob's Lottery Inc. has decided to offer winners a choice of $120,000 in 10 years or some amount currently. Assume that Bob's Lottery Inc. earns a 8 percent after-tax rate of return. What amount should Bob's offer lottery winners currently, in order to be indifferent between the two choices? Use Exhibit 3.1. Amount EXHIBIT 3-1 Present Value of a Single Payment at Various Annual Rates of Return 4% 5% 6% 7% 8% 9% 10% 11% 12% Year 1 962 952 943 .935 .926 917 909 901 .893 Year 2 925 907 .890 .873 .857 .842 .826 812 .797 Year 3 .889 .864 .840 .816 .794 .772 .751 .731 .712 Year 4 .855 .823 .792 .763 .735 .708 .683 -659 .636 Year 5 .822 .784 .747 1713 .681 .650 -621 593 567 Year 6 .790 .746 .705 .666 .630 .596 564 535 507 Year 7 .760 .711 .665 .623 583 547 513 482 452 Year 8 .731 .677 .627 .582 540 502 467 434 404 Year 9 .703 .645 592 .544 500 424 391 361 Year 10 .676 .614 .558 508 .463 .422 386 352 322 Year 11 .650 .585 .527 475 .429 388 350 317 .287 Year 12 .625 557 497 444 397 356 319 .286 -257 Year 13 601 530 469 415 368 326 .290 -258 .229 Year 14 577 505 442 .388 340 .299 .263 .232 .205 Year 15 555 481 .417 362 315 .275 .239 .209 .183 .460