Question
In: Finance
Consider an offer to supply 5 paintings per year to an art gallery in Rome for...
-
Consider an offer to supply 5 paintings per year to an art gallery in Rome for the next five years. The contract is exclusive, meaning that, if you accept it, you cannot sell paintings to other galleries or other clients. The contract also offers a signing bonus of $100,000. If you were to refuse the contract, you estimate that you would be selling 7 paintings a year, at a price of $45,000 each, for the next 5 years. Assume that your required rate of return is 20%. What is the minimum price per painting (assume the same price for each painting) at which you are willing to accept the contract?
A. $59,560 B. $39,517 C. $56,312 D. $65,500 E. $41,878
Solutions
Expert Solution
| PV of refusing the offer | ||||||
| Year | Cash flow | PVIF @ 20% | Present value | |||
| 1 | 315000 | 0.833333 | 262,500.00 | |||
| 2 | 315000 | 0.694444 | 218,750.00 | |||
| 3 | 315000 | 0.578704 | 182,291.67 | |||
| 4 | 315000 | 0.482253 | 151,909.72 | |||
| 5 | 315000 | 0.401878 | 126,591.44 | |||
| A | Present value= | 942,042.82 | ||||
| B | PV of sigining bonus = | 100000 | ||||
| C=A-B | Required amount = | 842,042.82 | ||||
| Computation of annual cash flow from offer -Put in caculator | ||||||
| FV | 0 | |||||
| PV | -842042.824 | |||||
| I | 20% | |||||
| N | 5 | |||||
| i | compute PMT | $281,562.03 | ||||
| ii=i/5 | Per painting price = | $56,312 | ||||
| Answer = option B) | $56,312 |
jeff jeffy answered 1 year agoRelated Solutions
Westward Art Gallery sells artwork that includes paintings, sculptures, and pottery. The gallery tracks the id,...
Westward Art Gallery sells artwork that includes paintings,
sculptures, and pottery. The gallery tracks the id, title, and
artist for each piece of art.
For paintings, the gallery records the media used to create the
work. Paintings may be oil, watercolor, pastel, or mixed-media. The
gallery also records the painting’s dimensions: length and width.
Create an enum for the media. The user should be able to provide an
int that will be converted.
For sculptures, the gallery records the material...
Westward Art Gallery sells artwork that includes paintings, sculptures, and pottery. The gallery tracks the id,...
Westward Art Gallery sells artwork that includes paintings,
sculptures, and pottery. The gallery tracks the id, title, and
artist for each piece of art.
For paintings, the gallery records the media used to create the
work. Paintings may be oil, watercolor, pastel, or mixed-media. The
gallery also records the painting’s dimensions: length and width.
Create an enum for the media. The user should be able to provide an
int that will be converted.
For sculptures, the gallery records the material...
Q1;Consider the following markets in the United States: Alarm Clocks, Art Gallery Visits, LED Lights, Inflatable...
Q1;Consider the following markets in the United States: Alarm
Clocks, Art Gallery Visits, LED Lights, Inflatable Pools. Which
order is most likely ranked from the biggest percentage increase in
sales to the biggest percentage decrease in sales due to
COVID-19?
Alarm Clocks, Art Gallery Visits, LED Lights, Inflatable
Pools.
Inflatable Pools, LED Lights, Alarm Clocks, Art Gallery
Visits.
Inflatable Pools, Alarm Clocks, LED Lights, Art Gallery
Visits.
LED Lights, Inflatable Pools, Alarm Clocks, Art Gallery
Visits.
Q30:
Consider the following...
Consider this case: Beatrice owns an art supply store called "Betty's Art Store", and has been...
Consider this case: Beatrice owns an art supply store called
"Betty's Art Store", and has been in the business for over ten
years. She is located in downtown Windsor and has many clients
including local artists and university/college art students. She
sells just about any item a visual artist can imagine, from canvas
to coloured paint, charcoal pen, rulers, etc. Betty has a lot of
stock and can handle special orders direct from her suppliers
should a client needs any...
Consider a project to supply 100 million postage stamps per year to the USPS for the...
Consider a project to supply 100 million postage stamps per year
to the USPS for the next five years. To pursue the project, you
will need to install $4.1 million in new manufacturing plant and
equipment. This will be depreciated straight-line to zero over the
project’s five years. The equipment can be sold for $540,000 at the
end of the project. You will also need $600,000 in initial net
working capital for the project and an additional investment of
$50,000...
Consider a project to supply 100 million postage stamps per year to the USPS for the...
Consider a project to supply 100 million postage stamps per year
to the USPS for the next five years. To pursue the project, you
will need to install $4.1 million in new manufacturing plant and
equipment. This will be depreciated straight-line to zero over the
project’s five years. The equipment can be sold for $540,000 at the
end of the project. You will also need $600,000 in initial net
working capital for the project and an additional investment of
$50,000...
Consider a project to supply 100 million postage stamps per year to the USPS for the...
Consider a project to supply 100 million postage stamps per year
to the USPS for the next five
years. To pursue the project, you will need to install $4.1
million in new manufacturing plant
and equipment. This will be depreciated straight-line to zero
over the project’s five years. The
equipment can be sold for $540,000 at the end of the project.
You will also need $600,000 in
initial net working capital for the project and an additional
investment of $50,000...
Consider a project to supply 100 million postage stamps per year to the USPS for the...
Consider a project to supply 100 million postage stamps
per year to the USPS for the next five years. To pursue the
project, you will need to install $4.1 million in new manufacturing
plant and equipment. This will be depreciated straight-line to zero
over the project’s five years. The equipment can be sold for
$540,000 at the end of the project. You will also need $600,000 in
initial net working capital for the project and an additional
investment of $50,000...
Bid Price - Consider a project to supply 100 million postage per year to the Postal...
Bid Price - Consider a project to supply 100 million postage per
year to the Postal Service for the next five years. You have an
idle parcel of land available that cost $750,000 five years ago; if
the land were sold today, it would net you $1,125,000 aftertax. The
land can be sold for $1,295,000 after taxes in five years. You will
need to install $5.1 million in new manufacturing plant and
equipment to actually produce the stamps; this plant...
Consider a project to supply 10 million sandbags per year to the Army Corps of Engineers...
Consider a project to supply 10 million sandbags per year to the
Army Corps of Engineers for the next four years. You have an idle
manufacturing plant available that cost $1 million five years ago;
if the plant was scrapped today, it would net you $100,000. You
will need to install $1.8 million in new manufacturing equipment to
actually produce the sandbags; this equipment will be depreciated
straight-line to zero over its four-year life. The equipment can be
sold for...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Discuss some examples of how motherboards and CPU combinations have evolved in the past 20 years....
- 16. What does HIRM provide to managers of health service delivery organizations? 17. What are the...
- Why do diamonds sell for such high prices? Why do pre-owned diamonds typically sell for such...
- The Utah Mining Corporation is set to open a gold mine near Provo, Utah. According to...
- Market Top Investors, Inc., is considering the purchase of a $350,000 computer with an economic life...
- As Tom Montgomery, how would you convince the De Beers Executive Committee to launch IIDV as...
- 1.2 Please give the example of the compensation package that you would like to provide to...
ADVERTISEMENT