3) You are in business negotiations with Mr. Mohammed Ezekiel Abedube, a Nigeria

Question

3) You are in business negotiations with Mr. Mohammed Ezekiel Abedube, a Nigerian prince who you met on the

Internet after he sent you an unsolicited e-mail. In exchange for your assistance, he promises you quarterly

payments of $200,000 (at the end of each quarter) for 2 years and then an annual payment of $1,000,000 (at the

end of each year) for years 3 through 10. If you consider the time value of money to be 8% and assuming that he

makes good on his promise, what are his future payments worth to you today?

Explanation / Answer

Year Cash flow Present value factor Present value of future '@ 8% payments 1 800000 0.926 740800 2 800000 0.857 685600 3 1000000 0.794 794000 4 1000000 0.735 735000 5 1000000 0.681 681000 6 1000000 0.630 630000 7 1000000 0.583 583000 8 1000000 0.540 540000 9 1000000 0.500 500000 10 1000000 0.463 463000 Total 6352400

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