Part of the Lottery Scam
A gentleman in Boise recently became somewhat wealthier:
There’s a lot of “if I won the lottery” talk in Boise these days, what with an unidentified, 30-something Boisean holding a $220.3 million Powerball jackpot ticket. The unnamed winner has to decide whether to take his winnings as a single, $125 million payout (before taxes) all at once, or a 30-year annuity that would total the full $220.3 million, made in equal payments of $7.3 million a year for 30 years.
Congratulations and may you live a long and fruitful life.
However, how do you feel about being lied to. Folks, the the lottery winning values may be big but they are not what they are made out to be. Read the above paragraph again. His payout will be $125 million not $220.3 million. Sure, if he takes annual installments the 30 x 7.3 comes close to the full value but any first year business major knows that $220 million now is not the same as that those 30 payments. Apply elementary finance and the net present value is maybe $146 million at an optimistically low discount rate of 3%.
, I realize that there is small print purporting to explain all this to the ticket buyers but the lure, all you and I see when we buy those tickets, is that big $220 million number. Why does the government lie to us about this?