Sherwin Williams will receive $21,600 a year for the next 18 years as a result o
ID: 2760663 • Letter: S
Question
Sherwin Williams will receive $21,600 a year for the next 18 years as a result of a picture he has painted. Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods.
What is the present value of these payments if the discount rate is 7 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
What is the present value of these payments if the discount rate is 7 percent? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Explanation / Answer
a. Sherwin Williams will receive $21,600 a year for the next 18 years and at 7% discount rate, the present value of future cash flow = $21600 * PVIFA (7%, 18) = $21600 * 10.059 = $217274.40
b. No, he should not willing to sell out his future rights now for $178,000.
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