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You work in the accounting department of a major flat-screen television manufacturer. Demand for your product...

You work in the accounting department of a major flat-screen television manufacturer. Demand for your product is very high. These televisions sell for $2,500 each. An offer has arrived on your desk from a major retailer to buy 100,000 televisions with 10 equal annual payments of $20 million starting immediately. The current interest rate is 6%.

Required:

What is the present value of the order? Do you advise your employer to accept or reject it? Justify your decision.

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Answer #1

The answer has been presented in the supporting sheet. For detailed asnwer refer to the supporting sheet.

E F A B C D G Н 1 Answer 2. 3 Present Value of order 4 = annual amount * Present value annuity advance (6%, 10) 5 = 20000000

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