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The four actors below have just signed a contract to star in a dramatic movie about...

The four actors below have just signed a contract to star in a dramatic movie about relationships among hospital doctors. Each person signs independent contracts with the following terms:

Contract Terms
Contract Amount Payment Date
Derek $ 540,000 2 years
Isabel 580,000 3 years
Meredith 450,000 Today
George 440,000 1 year

Required:
1-a. Assuming an annual discount rate of 9%, calculate the present value of the contract amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)

Derek - ?

Isabel - ?

Meredith - ?

George - ?



1-b. Which of the four actors is actually being paid the most?

multiple choice

  • Derek

  • Isabel

  • Meredith

  • George

Solutions

Expert Solution

Answer 1(a)

Contract Terms
Contract Amount
(a)		 Payment Date Present value factor @ 9%
(b)		 Present value
(a*b)
Derek 540,000 2 years                                       0.8417                 454,518.00
Isabel 580,000 3 years                                       0.7722                 447,876.00
Meredith 450,000 Today                                       1.0000                 450,000.00
George 440,000 1 year                                       0.9174                 403,656.00

1-b. Which of the four actors is actually being paid the most?

Answer: Derek is paid the most since the present value of Derek is the highest

ekkarill92 answered 2 years ago
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