11. A financial company that advertises on television will pay you $60,000 now for annual payments...
11. A financial company that advertises on television will pay you $60,000 now for annual payments of $10,000 that you are expected to receive for a legal settlement over the next 10 years. If you estimate the time value of money at 10 percent, would you accept this offer?
Homework Answers
The working is shown below:
Present value of annual payment = Annual payment * PVF(@10%,10 years)
= $10,000 * 6.144567
= $61,445.67
Offer should not be accepted as $60,000 being offered is less than the present value of annual payment.
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