M2D1: What if you won the money?

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Introduction:

Most of us dream of what it might be like to win the lottery. Suddenly, life would be easy and we would never have to worry about money again, right? Well, maybe. When we own something , whatever it is, it tends to become more important to us and we usually try to get as much value from whatever it is. 

This discussion will address the following Module Outcomes:

• MO1: Calculate present value (P), future value (F), or annual value (A) using various engineering economy factors and spreadsheet functions when confronted with shifted uniform series, gradient series, and single cash flows. (CO1)
• MO2: Determine nominal and effective interest rates for cash flows that are on a time basis other than a year. (CO1)

Before participating in the discussions, review The School of Business and Technology Discussion Guidelines.

Instructions:

For this discussion, research a recent lottery win and give your analysis on how the winnings were managed by answering the following questions:

1. Would you take the one-time payout (which is always less than the face value of the publicized winnings) or would you take an annuity payout (which is usually the face value of the winnings, but paid out in even amounts over time)? Justify and explain your answer using the tools you are learning in this module.  What did the person in your research do?
2. What portion of the one-time payout would you invest, how would you invest it, and what would be your expected returns over a 10 year period, and over a 20 year period?  Or, if you took an annuity payout, what portion would you invest, how would you invest it, and what would be your expected returns over a 10 year period, and over a 20 year period?  Again, justify and explain your answer using the tools you are learning in this module.

Base your answers on what you would do and what you noted from the real-life example that you read about. Use numbers that you can find or make some up that seem reasonable and make calculations from what you have learned in this module.  Question and comment on at least three of your fellow students’ initial posts.