ZuoTi.Pro
Question

You have been hired as a financial advisor to Steph Curry. He has received two offers...

You have been hired as a financial advisor to Steph Curry. He has received two offers for playing professional basketball and wants to select the best offer, based on considerations of money only. Offer A is an offer for $25 m a year for four years. Offer B is an offer of $20 m a year for five years. What is your advice, if the interest rate is 10% per year?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Total cash flow in offer a is 25*4=100 million and in offer b is 20*5=100 million

So, total cash flow is same in both the offers. Hence, without any calculation we see that Offer A is better than Offer B because cash flows are being realised earlier (25 versus 20)

Using calculations:

Present Value of Offer A=25/10%*(1-1/1.1^4)=79.24663616 million

Present Value of Offer B=20/10%*(1-1/1.1^5)=75.81573539 million

So, Offer A is better than Offer B

0 0
Add a comment
Know the answer?
Add Answer to:
You have been hired as a financial advisor to Steph Curry. He has received two offers...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • You have become a financial advisor and a new client has received a trust fund currently...

    You have become a financial advisor and a new client has received a trust fund currently worth $500,000. However, she will not have access to the fund until she turns 60 years old, which is in 20 years. At that time she can withdraw $10,000 per month. If the trust fund is invested at a 6 percent rate, compounded monthly, how many months will it last your client once he starts to withdraw the money?

  • PIUulen J (1J PLS). The Bachelor and the Bachelorette have hired you to determine who has...

    PIUulen J (1J PLS). The Bachelor and the Bachelorette have hired you to determine who has the best endorsement offer. The Bachelor has been offered the job as a spokesperson for the National I Like Myself Foundation as they figure that they do not have to offer any advice for him to do the job. The NILMF will pay him $2,000 per month starting ten years from today for a total of 120 months. He then will receive $40,000 per...

  • As a financial advisor you have a high wealth client who is thinking about making some...

    As a financial advisor you have a high wealth client who is thinking about making some life changes. Stanley is 50 (today is his birthday), and he want to retire at 65. He wants to put away the same amount of money every birthday (starting today) up to and including his 65th birthday. He then wants to be able to withdraw $100,000 every birthday (starting with his 66th) up to and including his 85th birthday.   He believes he can earn...

  • Assume you are working in an investment company as an investment advisor. You have a new...

    Assume you are working in an investment company as an investment advisor. You have a new individual investor ( called Kim) who wants to invest in financial securities. Kim is 45 years old, married with 3 kids (all in school), works as a marketing manager in an international pharmaceutical company and lives in a big apartment with his family in New York City. Kim is a new investor who is looking for a long-term  investment horizon and aiming income gain from...

  • TIME VALUE OF MONEY Jeff Warren after consulting with some PhD students and his Financial Advisor...

    TIME VALUE OF MONEY Jeff Warren after consulting with some PhD students and his Financial Advisor decided to register his server building company as S corporation, which is a special designation that allows small businesses to be taxed as if they were a sole proprietorship or a partnership rather than as a corporation whilst at the same time enjoying limited liability of a corporation. Jeff is satisfied with this choice because he is aware that one of the disadvantages of...

  • You have just been hired as the CFO (chief financial officer) of D.W.O.T.T. Inc. Congratulations!!! I...

    You have just been hired as the CFO (chief financial officer) of D.W.O.T.T. Inc. Congratulations!!! I am so super proud of you! Now get to work! You have lots to do because the last guy was lazy and good for nothing. Don’t worry, you have his face on a dart board in your office. The president of the DWOTT has given you a fairly large ‘to do’ list and wants it ASAP. So you load up on Monster Energy drinks...

  • As a financial planner, you have been given a task to advise your client, Mrs Naidoo,...

    As a financial planner, you have been given a task to advise your client, Mrs Naidoo, on a portfolio combination she can invest in. Mrs Naidoo wants to invest R1.2 million in a portfolio comprising of shares whose returns for the past five years are presented in the table below. YEAR ZINK TEND ALPHA BONA 2015 7.69% 12.5% 14.79% 2.82% 2016 10.83% 6.8% 3.26% -6% 2017 3.42% -7.75% -28.57% 13.64% 2018 -1.92% 10.83% 22.62% 2.98% 2019 9.33% 7.88% 9.02% 6.18%...

  • Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI). a large,...

    Suppose you have been hired as a financial consultant to Defense Electronics, Inc. (DEI). a large, publicly traded firm that is the market share leader in radar detection systems (RDSS). The company is looking at setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a 5-year project. The company bought some land three years ago for $7.3 million in anticipation of using it as a toxic dump site for waste chemicals, but it...

  • You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine...

    You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $1,240,000 in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $1,450,000 on an aftertax basis. In four years, the land...

  • Human Resources You have just graduated with your HAS degree and have been hired by Quality...

    Human Resources You have just graduated with your HAS degree and have been hired by Quality Home Care. The owner hasn’t given you a written job description or even a title but has told you what he wants you to do. “I started this company because I got tired of the bureaucracy at Mega Health System. We couldn’t get anything done. Even when it was obviously best for the patients and for the company, there was always some reason we...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT