CFAcountry Wrote: ------------------------------------------------------- > How long can you wait before the ticket is no > good? I think it’s a year. I don’t have personal experience though 
Each winning ticket gets a $190MM 26 year annuity or a lump payment of $81MM. Who would take the cash and who would take the annuity ($7.3 MM per year)?
Assuming the PV calculation is fair, I would take the annuity. I don’t need $81 million at once. However, there is a chance that sudden great wealth will turn me into a cocaine snorting irresponsible playboy with a propensity to destroy even the most dynastic of fortunes. So, it’s better to have the income distributed over many years.
^ yea but you’re forgetting the TVM, and the potential returns you can make with the 81MM cash… I’d take cash, and LIVE IT UP!!
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cash it. models and bottles.
iteracom Wrote: ------------------------------------------------------- > That’s why I stated the assumption of a fair discount rate. If someone took the time to calculate a fair discount rate, then the conclusion might be different. In any case, I am not that ambitious. Barring some sort of hyperinflation scenario, $7 million a year for 26 years is enough for me to not care about earning even a bit more than that. Maybe other people will be different.
ohai Wrote: ------------------------------------------------------- > Assuming the PV calculation is fair, I would take > the annuity. I don’t need $81 million at once. > However, there is a chance that sudden great > wealth will turn me into a cocaine snorting > irresponsible playboy with a propensity to destroy > even the most dynastic of fortunes. So, it’s > better to have the income distributed over many > years. You want to let the government hang on to your money?? It’s bad enough waiting on a tax refund. Forget that. They’re probably using an egregious discount rate to screw you on the PV calc.
I calc’d the IRR @ 7.7%. Not terrible for having to do absolutely nothing but sit back and enjoy!
With 81 million, you can write your will and donate money after your death but with 7mm if you die, they will stop making payment. I would take lumpsum anyday
BValGuy Wrote: ------------------------------------------------------- > I calc’d the IRR @ 7.7%. Not terrible for having > to do absolutely nothing but sit back and enjoy! I think you get the first payment on day 1, so IRR is closer to 8.7%. A return of 8.7% (or even 7.7%) for doing nothing is pretty hard to beat. I’m sure some of the ballers on here can generate double digit returns every year for 25 years, but I think I’d have to go with the annuity. I would think any remaining payments due after your death would go to your estate.
^ is this not an asset that can be passed down after you die? I’d view it almost like a loan that has to be repaid.
Who here is up for calculating the expected value of a lottery ticket? I know when the numbers get huge, the EV can (briefly) shift to a positive number. I’ve seen it done with hypotheticals; I’m curious to see how this most recent lottery would have worked out. I may look into this and calculate this later today.
^ I think it’s impossible to calculate effectively because there is a huge unknown of whether or not the pot will be divided between more than 1 winner
Didn’t calculate anything but if it’s fair I’d take the cash. With that kind of windfall you could almost certainly outperform the annuity through intelligent manager selection.
expected value is less than $1. based on the EV method, it’s not worth the $1 ticket
I would be pretty shocked if the expected value of a lottery ticket is ever more than the price. I mean, the people who structure the program can’t be *that* clueless. And that’s if you are risk neutral. If you are risk averse, which most people are, even if the expected $ value is equal to the ticket price, your expected utility will be lower than the utility from just holding the ticket money.
If you take the annuity your cash is invested in Treasurys by the lotto. It’s a horrible deal, particularly now. Always take the cash.
unless you want to assign “value” to the rush of thinking you may win.
Sweep the Leg Wrote: ------------------------------------------------------- > If you take the annuity your cash is invested in > Treasurys by the lotto. It’s a horrible deal, > particularly now. > > Always take the cash. So $190MM does not get you 26 payments of $7.3MM?