Question

In: Finance

AMC has just signed a contract. The contract requires an initial investment of $5 million, and...

AMC has just signed a contract. The contract requires an initial investment of $5 million, and creates positive cash flows of $2 million one year from today, $1.5 million two years from today, and $2.5 million three years from today. What is the value of this contract AMC can earn 9 percent on its money?

Solutions

Expert Solution

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=2/1.09+1.5/1.09^2+2.5/1.09^3

=$5.03 million(Approx)

NPV=Present value of inflows-Present value of outflows

=5.03-5

=$0.03 million(or $27841.08 approx)=value of contract

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

ST Trucking just signed a $3.8 million contract. The contract calls for a payment of $1.1...
ST Trucking just signed a $3.8 million contract. The contract calls for a payment of $1.1 million today, $1.3 million one year from today, and $1.4 million two years from today. What is this contract worth today at a discount rate of 8.77 percent? $3,198,053.81 $2,108,001.32 $3,480,817.37 $3,478,523.13 $3,202,223.89
Jason just signed a $6 million 3 year contract with the patriots. The contract calls for...
Jason just signed a $6 million 3 year contract with the patriots. The contract calls for a payment of $3 million 1 year from today, $2 million 2 years from today and $1 million 3 years from today, what is the contract really worth as of today if he can earn 10% apr on his money (assume annual compounding).
St trucking just signed a $3.8 million contract. The contract calls for a payment of $1.1...
St trucking just signed a $3.8 million contract. The contract calls for a payment of $1.1 million today, $1.3 million one year from today, and $1.4 million two years from today. What is the contract worth today at a discount rate of 8.0 percent? Please show how to work this problem in excel.
Margaret Putter is a professional golfer who has just signed a $3 million contract. The terms...
Margaret Putter is a professional golfer who has just signed a $3 million contract. The terms are five annual payments of $600,000 each. Determine the present value of the contract to Margaret, assuming her interest rate is 5%.
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment...
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add...
A famous quarterback just signed a $14 million contract providing $3.5 million a year for 4...
A famous quarterback just signed a $14 million contract providing $3.5 million a year for 4 years. A less famous receiver signed a $10.6 million 4-year contract providing $3 million now and $3.2 million a year for 4 years. The interest rate is 8%. a. What is the PV of the quarterback's contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) b. What is the PV of the receiver's contract? (Do not round...
Gregory has recently signed a contract to purchase an investment property. The details of the contract...
Gregory has recently signed a contract to purchase an investment property. The details of the contract are listed below: The agreed purchase price was $200000 Gregory will make a cash deposit of 20% of the purchase price immediately using money from his savings The other upfront costs total $3500, also paid immediately using money from his savings He will fund the remainder of the balance (the remaining 80% of the purchase price) using a mortgage from his local bank. The...
Gregory has recently signed a contract to purchase an investment property. The details of the contract...
Gregory has recently signed a contract to purchase an investment property. The details of the contract are listed below: The agreed purchase price was $200000 Gregory will make a cash deposit of 20% of the purchase price immediately using money from his savings The other upfront costs total $3500, also paid immediately using money from his savings He will fund the remainder of the balance (the remaining 80% of the purchase price) using a mortgage from his local bank. The...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT