O'Reilly Is a Masterful Lottery Player

question 69

Essay

O'Reilly is a masterful lottery player. The megamillion jackpot is now up to $200 million. If O'Reilly wins the jackpot, he has a choice of receiving $200 million in five years or a smaller lump sum now. Advise O'Reilly on his choice under the following scenarios. Which option should he take and why? Use Exhibit 3.1. a. O'Reilly's after-tax return is 10 percent. If he chooses the current lump-sum option, the lottery will pay him $130 million. b. O'Reilly's after-tax return is 10 percent. His current tax rate will be 35 percent if he receives the lottery payment now. His expected tax rate in five years will be 40 percent. If he chooses the current lump-sum option, the lottery will pay him $100 million.

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Definitions:

Universal

Universal pertains to something that is applicable or common to all cases, people, or situations without exception.

Organizational Commitment

The psychological attachment or loyalty of an employee towards their organization.

Seniority

A measure of how long an individual has been with an organization or in a specific position, often influencing their rank and privileges.

Positive Emotions

Feelings that are subjectively considered to be positive, such as joy, gratitude, and love, often leading to increased well-being and life satisfaction.