You have recently won the super jackpot in the Washington State Lottery. On reading the fine print, you discover that you have the following two options:

1- You will receive 30 annual payments of $175,000, with the first payment being delivered one year from today. The income will be taxed at a rate of 28 percent. Taxes will be withheld when the checks are issued.

2- You will receive $530,000 now, and you will not have to pay taxes on this amount. In addition, beginning one year from today, you will receive $125,000 each year for 30 years. The cash flows from this annuity will be taxed at 28 percent.

Using a discount rate of 10 percent, which option should you select?

Input area: a. Number of payments Annual payment Tax rate 30 , 000 28% b. Payment today Annual payments Number of annual payments Tax rate Discount rate 10% Output area: a. Aftertax payments PV of Option A b. Aftertax payments PV of option B You should choose option