# Won the Lottery for 1 Million and Term Paper

#### Excerpt from Term Paper :

won the lottery for 1 million and you had the chance to take a lump sum or payments over 20 years which option would you choose? Why?

I would choose the option of lump sum payment for the obvious reason that money loses part of its value over time: the phenomenon commonly known as the time value of money. Any payment received upfront has a greater present value than deferred or future payments. This preference for lump sum payment, of course, is made on the assumption that there are no differences in the taxes applicable to winning from the lottery whether received in lump sum or in parts, and that the total amount of \$1 million remains the same in both cases, i.e., the part payments received over a period of 20 years would add up to \$1 million.

For elaboration, consider:

If one takes a loan of \$1 million from a lending institution, which is returnable over 20 years in equal installments and the discount rate or rate of interest is 5% per annum, one would have to pay 20 installments of \$80,242.59. The total amount thus paid back would be (80,242.59 x 20) = \$1,604,851.80 or > \$1.6 million. This indicates that \$1.6 million received over 20 years in equal parts (assuming a discount rate of 5%) has a present value of just \$1.0 million received as lump sum today.

Conversely, if a total amount of \$1 million is received in 20 equal installments of \$50,000 over 20 years (50,000 x 20 = 1,000,000), it would be equivalent to just \$623,110 in present terms (again assuming an annual discount rate of 5%).

These calculations indicate that I would prefer to receive any amount in excess of \$623,110 rather than \$1 million in 20 years; hence taking a lump sump payment of \$1 million upfront rather than the same amount in 20 years is far more preferable.

2. What are the factors that have led to the failure or success of e-business?

In the 1990s, when Information Technology and the Internet were proliferating…

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