Not sure if anyone caught the fine print that was shown at the end of each episode, but it said that the money (both the one million and the two million dollars) is paid over FORTY YEARS! #$%&&%'n NBC...even the lottery isn't that stingy! However, they can opt for the present value of the money in one lump sum.

This is how it breaks down:

40 YEAR PAYMENT PLAN

$1,000,000 - $25,000 per year BEFORE taxes (guessing $18,000 after)

$2,000,000 - $50,000 per year BEFORE taxes (guessing $35,000 after)

Chad's cut...

$500,000 - $12,500 per year BEFORE taxes (not even worth guessing)

THE "I WANT IT NOW" PLAN (One Lump Sum)

$1,000,000 - a paltry $69,325.31 BEFORE taxes

$2,000,000 - a measly $138,650.61 BEFORE taxes

And for Chad...

$500,000 - a poverish $34,662.65 BEFORE taxes

Gotta love those network big wigs. Way to reward the very people who are making them wads of cash! I wonder what Chad and Erin's reaction was after they found out about that. Probably that they were even happier about their choices seeing that the money really is NOTHING compared to love.

• RE: For Love or Chump Change 2,AMAI, 07:37 AM, 09-09-03
• RE: For Love or Chump Change 2,bostonjd, 09:11 AM, 09-09-03
  • RE: For Love or Chump Change 2,LABachlr, 10:35 AM, 09-09-03
    • RE: For Love or Chump Change 2,mikey, 11:07 AM, 09-09-03
• Incorrect,AyaK, 11:06 AM, 09-09-03
• RE: For Love or Chump Change 2,LABachlr, 11:20 AM, 09-09-03
  • RE: For Love or Chump Change 2,AZ_Leo, 01:24 PM, 09-09-03
    • RE: For Love or Chump Change 2,LABachlr, 01:31 PM, 09-09-03
      • RE: For Love or Chump Change 2,mom2adog, 02:07 PM, 09-09-03
        • RE: For Love or Chump Change 2,LABachlr, 02:10 PM, 09-09-03
• RE: For Love or Chump Change 2,LABachlr, 11:25 AM, 09-09-03

I can see the dilemma. On the one hand, the 40 year plan guarantees you see money Every Single Year. On the other hand, where is the guarantee that the money is truly "there" even if the company goes out of business?

I'd take the 40 year option, but I'd want a lawyer to make sure the money has been placed in trust, earning interest and that a mechanism is in place to guarantee I get paid my winnings even if the company ceases to exist.

It seems kind of skanky, but face it - even if they offered the 1 mill to the players, they'd lose half of it any way in taxes. (Load of shite the stupid taxes). So, provided one can organize things properly, the best option IS to take the longer view.

Don't know where you are getting your information, but the present value (lump sum) plans you propose are way undervalued. For instance, the NPV of $12,500 (chad's plan) a year for 40 years discounted at 6% (the thirty year treasury rate +1%) is $188,000. Common sense tells you that your estimate of $34,662 is not even in the ballpark as anyone in their right mind would swap $34,000 for a 40 year annuity of $12,500, particularly in the current environment of low interest rates.

The only thing I do agree with is that this payment sucks...

>Don't know where you are getting
>your information, but the present
>value (lump sum) plans you
>propose are way undervalued.
>For instance, the NPV of
>$12,500 (chad's plan) a year
>for 40 years discounted at
>6% (the thirty year treasury
>rate +1%) is $188,000.
>Common sense tells you that
>your estimate of $34,662 is
>not even in the ballpark
>as anyone in their right
>mind would swap $34,000 for
>a 40 year annuity of
>$12,500, particularly in the current
>environment of low interest rates.
>
>
>The only thing I do agree
>with is that this payment
>sucks...

OK, first of all, you do not do any present value configuring with the 40 year plan. Chad gets $500,000 spread over 40 years, which is $12,500 per year ($500,000/40). I did not take into account him investing it, as he may just blow it on Erin.

Secondly, for the present value of $500,000, the question is how much is $500,000 in the year 2043 worth today. Use a present value calculator (found at http://www.tcalc.com/tvwww.dll?User?Tmplt=pv.htm&cstm=cpawebsite), punch in the numbers, and that is where I got the $34,000 figure. I even used the default 6.9% interest for the rate of return. If you plug in 0% interest, then it goes down to $31,594.36. 40 years is a long time. So common sense would tell you that figure is correct.

Your calculation is the present value (assuming 6.9% inflation) if all $500,000 (or $1 mill or $2 mill) were given in year 2043. Here, one-fortieth is given each year for 40 years, so the present value is substantially more. For example, the amount given in the first year would not be discounted at all, and the amount given in the second year would only be discounted by the first year's inflation.

If Chad received only one payment of $500,000, and it was made 40 years from now, then your estimate of the PV ($34,000) would be correct. But he's not. You need to use the formula for an annuity due, which I calculated back during FLOM1:

http://community.realitytvworld.com/boards/DCForumID46/9.shtml#12

...and we posted it as a news story back then, too:

http://www.realitytvworld.com/index/articles/story.php?s=1347

NBC subsequently claimed that it was using a slightly lower discount rate than I figured, making the $1 million annuity worth $488,000 today. Thus, IF Erin gave Chad half of her "million," he actually received an annuity due worth $244,000 -- or about a quarter of a million.

It's not chump change, even if it isn't half a million.

I stand corrected, and I'm glad. I hate cheap people, companies, etc.

However, you guys are not taking taxes into consideration. Cut Chad's take by half for taxes, and he doesn't even have enough to buy a Ferrari. However, you're right. It is still above the Chump Change level. He could still buy a Porsche. However, if I were he, I'd invest at least half.

Would the taxes be the same on his as on hers? Her money is a prize but wouldn't his be a gift? I'm no tax expert but wouldn't the rates be different?

Good point. But I believe that you can only write off $10,000 per year as a gift. The rest would be taxable.

LAST EDITED ON 09-09-03 AT 02:07 PM (EST)

So...if Chad took the money as a yearly annuity (instead of all in one chunk), could he claim the first $10K of each annual amt. as a "gift" for that year?

If it came from Erin each year, yes. But that is not the way it is setup. She gave him a check that she filled out, but that is an NBC check. So, Chad will have to claim it just like Erin will. 100% taxable.

However, that is still incredibly cheap of them to do that.