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Author Question: Michael received a professional baseball contract paying 7,000,000 per year for 5 years, Bert ... (Read 40 times)

OSWALD

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on: Jul 11, 2018
Michael received a professional baseball contract paying 7,000,000 per year for 5 years, Bert received a two-year contract for 16,000,000 per year. For purposes of calculations, treat these contracts as ordinary annuities.
 
  Who's contract has a greater present value if we assume a discount rate of 6?
  A) Bert = 29,334,283
  B) Michael = 29,486,547
  C) Bert = 39,459651
  D) Michael = 39, 743,196

Question 2

Which of the following equations for the Book value Plus Adjustment method is correct?
 
  A) Value of equity (VE) = market value of equity - adjustments
  B) Value of equity (VE) = book value of equity + adjustments
  C) Value of equity (VE) = book value of equity - adjustments
  D) Value of equity (VE) = market value of equity + adjustments


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johnharpe

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Reply #1 on: Jul 11, 2018
Answer to Question 1

B
Explanation: B) Michael: Via Calculator: N = 5, I =6, PMT = 5,000,000, Solve for PV = 29,486,547.
Bert: Via Calculator: N = 2, I =6, PMT = 16,000,000, Solve for PV = 29,334,283.

Answer to Question 2

B


OSWALD

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Reply 2 on: Jul 11, 2018
YES! Correct, THANKS for helping me on my review

juliaf

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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