Wednesday, May 24, 2006

Blagojevich's $5 billion exaggeration


Had a financial whiz friend walk me through a rudimentary estimate of the value of the Illinois Lottery to a buyer. Anyway you slice it, it is worth nowhere near Rod Blagojevich's claim of $10 billion. Try about half that.

The above assumes a 19-year shelf life and a discount rate of 10 percent, which errs on the side of Blagojevich. In reality, it probably will be higher. Nonetheless, with that scenario, assuming annual growth of 5 percent in current lottery profits, the asset is probably worth just under $5 billion.

Go to the site and play around with the numbers yourself. You'll never get close to $10 billion.

At $5 billion, the skimmed money is insufficient to even put on the table as an education plan so I'm guessing Rod's people just made up the $10 billion figure. Unless they are going to let a company dramatically expand gambling in Illinois.

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