TonyLong has just learned he has won a $509,800prize in the lottery. The lottery has given him two options for receiving the payments. (1) IfTonytakes all the money today, the state and federal governments will deduct taxes at a rate of48% immediately. (2) Alternatively, the lottery offersTonya payout of20equal payments of $38,400with the first payment occurring whenTonyturns in the winning ticket.Tonywill be taxed on each of these payments at a rate of25%.

Compute the present value of the cash flows for lump sum payout.

AssumingTonycan earn an10% rate of return (compounded annually) on any money invested during this period, compute the present value of the cash flows for annuity payout.