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Phil will receive $18,500 per year for the next 25 years as a payment for a...

Phil will receive $18,500 per year for the next 25 years as a payment for a screenplay he wrote. If a 12 percent rate is applied, should he be willing to sell out his future rights now for $165,000?

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Answer #1

Present value of annuity=Annuity[1-(1+interest rate)^-time period]/rate

=18500[1-(1.12)^-25]/0.12

=18500*7.84313911

=$145098.07(Approx)

Hence since $165,000 is being received now which is higher than $145098.07;rights must be sold now.

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