Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Chapter 9, Problem 15P

Sherwin Williams will receive $18,500 a year for the next 25 years as a result of a picture he has painted. If a discount rate of 12 percent is applied, should he be willing to sell out his future rights now for $165,000 ?

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Matthew is considering several possible compensation alternatives for services he has provided as a consultant:     Option A:  Matthew could receive $8,000 today. Option B:  Matthew could receive $2,500 at the end of each of the next four years. Option C:  Matthew could receive $12,000 five years from now.    Required:    Calculate the present value for each option assuming that Matthew can earn 7 percent on any investment funds. Which option results in the greatest financial benefit to Matthew? If Matthew earns 10 percent, will that change your answer to # 2 above?  Please explain.
Heather will receive $13,000 at the end of every year for the next 15 years as a payment for a new song she has written. If a 8 % return is applicable, should she be willing to sell out her future rights now for$120,000?
Bill will receive a royalty payment of $18,000 per year for the next 25 years, beginning one year from now, as a result of a book he has written. If a discount rate of 10 percent is applied, should he be willing to sell out his future rights now for $160,000? How about $162,500? $165,000?

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Loose Leaf for Foundations of Financial Management Format: Loose-leaf

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