Question
In: Accounting
On May 15, 2018 Phil Brubaker reached a settlement on a long overdue contract. The settlement...
On May 15, 2018 Phil Brubaker reached a settlement on a
long
overdue contract. The settlement results in Phil receiving a
total of $2,000,000 -- scheduled over 5 annual payments of
$400,000 each. The first payment starts on May 15, 2021, with
the remaining 4 payments following on May 15, 2022, May 15,
2023, May 15, 2024, and May 2025.
Phil wants to know the present value of his settlement today
on
May 15, 2018, at a 4% interest rate. Show all calculations.
Solutions
Expert Solution
- All working forms part of the answer
|
Period |
Date |
Amount received |
Present Value factor at 4% |
Present Values |
|
[A] |
[B = 1/(1.04)Period] |
[C = A x B] |
||
|
0 |
15-May-18 |
$ - |
1 |
$ - |
|
1 |
15-May-19 |
$ - |
0.961538462 |
$ - |
|
2 |
15-May-20 |
$ - |
0.924556213 |
$ - |
|
3 |
15-May-21 |
$ 400,000 |
0.888996359 |
$ 355,599 |
|
4 |
15-May-22 |
$ 400,000 |
0.854804191 |
$ 341,922 |
|
5 |
15-May-23 |
$ 400,000 |
0.821927107 |
$ 328,771 |
|
6 |
15-May-24 |
$ 400,000 |
0.790314526 |
$ 316,126 |
|
7 |
15-May-25 |
$ 400,000 |
0.759917813 |
$ 303,967 |
|
Present Value of his settlement Today on May 15, 2018 |
$ 1,646,384 |
|||
- Answer = $ 1,646,384 is the Present Value of his settlement Today on May 15, 2018
ekkarill92 answered 2 years agoRelated Solutions
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