A new Mega Millions jackpot winner has been announced, this time taking home $1.28 billion in cash.
However, headlines announcing that the winner will receive only $433.7 million have left some people perplexed.
Was the winner truly taxed at 70%?
It can be difficult for any organisation to come up with billions of dollars on short notice.
The Multi-State Lottery Association, which is in charge of the Mega Millions jackpot, is no exception.
As a result, lottery winners have two choices: receive a series of payments over time or receive a smaller prize immediately.
If winner wants the winning amount annually. Then the value of this annuity payment option was $1.28 billion.
Winners who choose the lump sum prize receive cash in hand, but their payout is less than the annuity payout.
This phenomenon is explained by the time value of money principle, which states that a dollar received today is worth more than a dollar received tomorrow.
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