Tuesday, June 30, 2009
America's Got Ripped Off
What a rip off! That means that if you are one of five clogging sisters, who are all now married with kids and living in different states, winning the "million dollar contest" means getting annual five thousand dollar checks until 2049. And who knows what the value of the dollar will be at that time?
What if you are an unemployed farmer from Kentucky, with a gift for Country music, and you choose the annuity's present value when you win? How much would you take home?Well, assuming five percent interest, we can use our simple present value formula (right): if i=.05, n=40, and C=1,000,000 then our present value is $428,977.16. Deduct federal income tax (my unemployed friend, you are now a high earner and get to pay 35% like the rest of the fat cats) and state income tax (6% in Kentucky) and you are left with $253,096 a mear quarter of the purported prize.
I don't have a favorite yet, but I'm hoping some more high quality acts will be found in the next cities' auditions for the Las Vegas showdown (read hoping David Hasselhoff will say something insane to praise a mediocre act). Regardless, I hope whoever wins isn't too disappointed by the real value of their prize. Shame on NBC for being so stingy!
Compared with the totality of knowledge which is continually utilized in the evolution of a dynamic civilization, the difference between the knowledge that the wisest and that which the most ignorant individual can deliberately employ is comparatively insignificant. ~Fredrich Hayek in The Constitution of Liberty