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Vlada [557]
3 years ago
11

Howie Long has just learned he has won a $506,300 prize in the lottery. The lottery has given him two options for receiving the

payments.
(1) If Howie takes all the money today, the state and federal governments will deduct taxes at a rate of 46% immediately.

(2) Alternatively, the lottery offers Howie a payout of 20 equal payments of $37,000 with the first payment occurring when Howie turns in the winning ticket. Howie will be taxed on each of these payments at a rate of 26%.

Required:

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

2. Assuming Howie can earn an 8% rate of return (compounded annually) on any money invested during this period, compute the present value of the cash flows for annuity payout.

3. Which pay-out option should he choose?
Business
1 answer:
Hitman42 [59]3 years ago
5 0

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

A).Present Value of the Cash Flow for the Lump Sum Payout

= Prize of Lottery Amount × (1 -Tax Rate)

= $506,300 × (1 - 0.46)

= $506,300 × 0.54

= $273,402

B).Present Value of the Cash Flows for Annuity Payout is

= Annuity Payment × (1 - Tax Rate) × PVIFA 8%,20 Years × (1  + Rate of Return)

= $37,000 × (1 - 0.26) × 9.8181 × (1 + .08)

= $37,000 × 0.74 × 9.8181 × 1.08

= $290,325

c). According to the analysis, $290,325 is more than the $273,402, So he should be chooses option (b) $290,325 as a payout option.

     

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Answer:

North Star

Adjusting Journal Entries:

December 31:

Rent Expense      $1,280

Prepaid Rent                      $1,280

To accrue rent for the period.

Depreciation Expense $1,080

Accumulated Depreciation           $1,080

To accrue Depreciation charge for the year.

Utilities Expense $9,800

Utilities Payable            $9,800

To accrue unpaid utilities.

Income Tax Expense $470

Income Tax Payable         $470

To accrue income tax liability.

Explanation:

Adjusting entries are journal entries that are made at the end of an accounting period to ensure that all expenses and incomes pertaining to the period are recognized in accordance with the accrual concept and the matching principle.  These accounting concepts require that all expenses incurred whether paid for or not and income whether received or not, which relate to the period, are matched respectively.

7 0
3 years ago
why can it be dangerous to provide credit card information over the internet? does it stop the risk if you only use credit cards
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If there were no rules or information security standards governing the data that makes up an e-commerce transaction, the Internet would not be as popular as it is now.

It is well recognized that using cyber security is important for e-commerce. Because cyber assaults may result in significant loss of income, data, and company viability, cyber security is crucial for e-commerce. Be aware that an increase in online crime may cause a crash. Therefore, I would say that, in the absence of regulations or information security standards pertaining to the data that makes up an e-commerce transaction, the Internet would not be as popular as it is now.

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1 year ago
For a plaintiff to establish that he or she has standing to sue, the plaintiff must allege ________.
Bad White [126]

For a plaintiff to establish that he or she has the standing to sue, the plaintiff must allege a personal stake in the resolution of the controversy.

<h3>Who is a Plaintiff?</h3>

A plaintiff is an individual or group who initiates a lawsuit in a court of law. The plaintiff by doing so seeks justice and a legal remedy for that particular problem.

When a plaintiff seeks to establish that he or she has a legal standing to sue, he must allege a personal stake in the resolution of the controversy. That way, he would properly establish the fact.

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5 0
2 years ago
What are some ways I can help the economy
Temka [501]

Answer:    

Lower interest rates – reduce cost of borrowing and increase consumer spending and investment.

Increased real wages – if nominal wages grow above inflation.

Higher global growth – leading to increased export spending.

Devaluation, making exports cheaper and imports more expensive, increasing domestic demand.

Explanation:

Some ways you can help the economy are

1. Lower interest rates – reduce cost of borrowing and increase consumer spending and investment.

2. Increased real wages – if nominal wages grow above inflation.

3. Higher global growth – leading to increased export spending.

4. Devaluation, making exports cheaper and imports more expensive, increasing domestic demand.

7 0
3 years ago
Read 2 more answers
John manufactures household furniture. His start-up costs, including tools, plans, and advertising, total \$5000$5000dollar sign
scZoUnD [109]

Answer:

$5,000 + $350f

Explanation:

The computation of the production cost in dollars is shown

Here we use the equation form

The start up cost is $5,000

Labor, material cost $350

Now if he makes f pieces of furniture so, his production cost would be

= Startup cost + labor, material cost

= $5,000 + $350f

Hence, this is the answer and the same is to be provided

8 0
3 years ago
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