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

future payments worth to you today

Present Value Year Cash flow $ PV@8% p.a PV $ 0.25         2,00,000             0.9804     1,96,078 0.5         2,00,000             0.9615     1,92,308 0.75         2,00,000             0.9434     1,88,679 1         2,00,000             0.9259     1,85,185 1.25         2,00,000             0.9078     1,81,554 1.5         2,00,000             0.8903     1,78,063 1.75         2,00,000             0.8735     1,74,703 2         2,00,000             0.8573     1,71,468 3       10,00,000             0.7938     7,93,832 4       10,00,000             0.7350     7,35,030 5       10,00,000             0.6806     6,80,583 6       10,00,000             0.6302     6,30,170 7       10,00,000             0.5835     5,83,490 8       10,00,000             0.5403     5,40,269 9       10,00,000             0.5002     5,00,249 10       10,00,000             0.4632     4,63,193 63,94,855

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