Don Draper has signed a contract that will pay him $50,000 at the end of each year for the next 8 years, plus an additional $150,000 at the end of year 8. If 7 percent is the appropriate discount rate, what is the present value of this contract?

Don Draper has signed a contract that will pay him $50,000 at the end of each year for the next 8 years, plus an additional $150,000 at the end of year 8. If 7 percent is the appropriate discount rate, what is the present value of this contract?

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter18: Accounting Periods And Methods

Section: Chapter Questions

Problem 16DQ

See similar textbooks

Related questions

Q: 3. Calculate the APR for a 6% per annum nominal rate of interest that is compounded (a) 4 times per…

A: The annual percentage rate is used to calculate the actual return over the course of a period. It…

Q: Q37 Board Company's direct labor information for February is as follows: Direct labor hours…

A: First, we will calculate the standard rate using the unfavorable variance, after that, we calculate…

Q: You have decided to buy a perpetual bond. The bond makes one payment at the end of every year…

A: To calculate the payment at the end of each we will use below formula Annual payment = PV*r Where…

Q: which is also its expected return on new investment; this is expected to continue forever. What do…

A: The Current market price per share is calculated using Gorden's Model. The Current Stock price is…

Q: At a discount rate of 6.00%, find the present value of a perpetual payment of $ 1,000 per…

A: Perpetual payment = $1000 Discount rate = 0.06 Discount rate = 0.03 Present value of the…

Q: Angela Montery has a five-year car loan for a Jeep Wrangler at an annual interest rate of 5.7% and a…

A: Data given: N=5 year Interest rate = 5.7% PMT= $595.50 After 3 years, Angela decides to purchase a…

Q: Tovar Cie is a French firm that has been asked to provide consulting services to help Gredia Company…

A: The net present value method is used to find out the profitability of a project by adding up…

Q: Working capital: Laurel Electronics reported the following information at its annual meeting: The…

A: Here,

Q: a. Calculate the present value of the annuity, assuming that it is (1) An ordinary annuity. Sulev…

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: A certain project which requires an investment of P 80,000 will produce cash savings after taxes of…

A: Data given: Initial investment = P 80,000 Cash savings after tax= P 20,000 N= 8 years Required::…

Q: Calculate the probability oF loan default (PD) for Upington Solar Corporatio

A: Probabilty of Loan Default: It represents the probability or likelihood that the borrower will not…

Q: If you deposit today 11,445.85 in an account earning 8% compound interest, for how long should you…

A: Present Value: It is the present value of the future amount of an investment and is estimated by…

Q: Discuss the main factors which a company should consider when determining the approximate mix of…

A: Short term debt is defined as any loan that is due within a year. The balance sheet shows short-term…

Q: 0 million shares and 200,000 bonds outstanding at par value $15,000. In addition, it has $500…

A: Cost of capital would be the weighted average cost of capital of equity, bond and short term debt…

Q: eBook Problem Walk-Through Profit Margin and Debt Ratio Assume you are given the following…

A: Financial ratios are used to calculate various accounting and financial data. The main aim of the…

Q: Discuss the degree to which existing empirical evidence confirm each of the 3 forms of emh

A: As per the efficient market hypothesis (EMH), stock prices exchange at a market price that…

Q: Consider a 30-year Government of Canada bond with a face value of $1,000 that has a coupon rate of…

A: A bond is a fixed income instrument. It pays periodic interest payments (also known as coupon…

Q: a. You pay 3.37% interest rate for a 30-year loan. Create an amortization table with a spreadsheet,…

A: Loan (mortgage) amortization schedule refers to a schedule which is prepared to shows the periodic…

Q: Evaluate the following statement: If CAPM (Capital Asset Pricing Model) holds, the expected return…

A: CAPM or Capital Asset Pricing Model is the formula that represents the relationship between the…

Q: Given the following cash flow for a certain investment and a MARR of 12% per year: 0 1 2 3 4 5 6…

A: Here, Cash Flow in Year 0 is -P30,000 Cash Flow in Year 1 is -P 19,000 Cash Flow in Year 2, 3 and 4…

Q: Wayne, Inc.'s outstanding common stock is currently selling in the market for $54. Dividends of…

A: Here, Market Price of Share is $54 Last Dividend Per Share is $3.16 Return on Equity is 35%…

Q: Explain and define deeply the three (3) types of electronic payment. Cite some situational examples.

A: An electronic payment is that payment which is made digitally and in which there is no involvement…

Q: Abdul Rahman borrowed an amount of nominal due is payment value ($2000) on 1/2/2020. The on 9/1,…

A: Bartleby's Guideline “Since you have asked multiple question, we will solve the first question for…

Q: While Mary Corens was a student at the University of Tennessee, she borrowed $9,000 in student loans…

A: Present value of annuity is the current value of the future payments that are calculated using the…

Q: iven that a firm's return on equity is 17 percent and management plans to retain 41 percent of…

A: Growth rate of the firm depends on the return on equity and retention ratio and very important…

Q: P LIC Use PMT= to determine the regular payment amount, rounded to the nearest dollar. The price of…

A: A mortgage is a type of loan that is linked to real estate. It is a form of a secured loan on the…

Q: ly easy to work this problem dealing with the individual cash flows. However, if you have a…

A: Present value = Discounted value value of cashflows at market rate or given rate of interest.

Q: On January 2, 2019 Sona bought 10 lots (1,000 stocks) of COPA at $10,000,000. During that year, she…

A: To Find: Aritmatic return Geometric return Money weighted return

Q: What agencies regulate securities markets? How are start-up firms usually financed? Differentiate…

A: A business that is considering to issue equity by selling its shares to public will have to follow…

Q: A 15-year bond with 7.5% coupons paid semiannually will be redeemed at P1400. The bond is bought to…

A: Semiannual coupon rate = 0.0375 (i.e. 0.075 / 2) Semiannual yield (y) = 0.03 (i.e. 0.06 / 2)…

Q: Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4 Req 5 Req…

A: 1. Payback Period is the length of time required to recover the cost of Investment. (a) When Cash…

Q: How does short-term financing differ from long-term financing? Give two business uses for each type…

A: Short term financing refers to financial requirements for a period of less than 1 year. In other…

Q: Reno Revolvers has an EPS of $2.50, a free cash flow per share of $3.20, and a price/free cash flow…

A: The P/E ratio is used to measure the value of the company and to determine if the company is…

Q: In estimating continuing value, how does assuming that RONIC is equal to WACC affect the importance…

A: .Continuing value is the present value of the cash flow when we assume that the growth rate will be…

Q: Suppose you have received a credit card offer from a bank that charges interest at 1.1% per quarter,…

A: The nominal rate is the rate that the financial institution quotes when giving out or receiving…

Q: In order to raise money, existing corporations can sell more shares in an initial public offering…

A: An initial public offering (IPO) is the method of selling shares of a private firm to the general…

Q: Ricardo wants to buy a large fishing boat so that he can go deep sea fishing. He needs $100,000 and…

A: Solution:- When some amount is borrowed, it can either be repaid as lump sum payment or in…

Q: Bolton Corporation had additions to retained earnings for the year just ended of $230,000. The firm…

A: The relation between the closing market price of a share and its book value is known as the…

Q: An investment is be made with an initial capital of PHP 853512. It is expected that there will be an…

A: Payback period Payback period is a capital budgeting tool to decide on the best investment…

Q: st cent

A: A growth model assesses a company's stock by assuming that payments to common equity owners will…

Q: calculate the cost of the preference share

A: Cost of preference share = Annual dividend/Current price

Q: Instruction: Complete ALL questions. Question 1 A. Use an example to explain the relationship among…

A: Expected return on Stock: It is called historical rates of return and is the return that an…

Q: College students are now graduating with loan debts averaging $24,000. a. If students repay their…

A: Amortized Loan: Amortized loan is a type of loan in which the borrower would pay periodic payments…

Q: are these premium for discount bonds? What is the price of the bonds?

A: Bond valuation refers to a method which is used to compute the current value or present value (PV)…

Q: I already found the correct answers for a. and b. but they do not match what is here... The correct…

A: Value of a firm now is essentially the sum of present values of all its future cash flows. This is…

Q: Calculate the future value of an ordinary annuity consisting of monthly payments of $450 for five…

A: An ordinary annuity is an annuity where the periodic payment occurs at the end of the period.

Q: Compute the unknown annual revenues to reach equilibrium on the cash flow series over the service…

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: each subsequent deposit If the account earns an a of 4%, what is the accum after 12 years? 1,850…

A: The future value of deposit increase with increase in deposit and interest accumulated over the…

Q: Analyze the data below and write what each of these values mean in one coherent paragraph

A: Data given:: Characteristic Revenue share Fashion and leather goods 48% Selective retailing…

Q: Why do an investor need to know and understand Portfolio Management and how do they handle their…

A: Portfolio management is the process of selecting, prioritizing, and controlling an organization's…

Concept explainers

Types of Insurance Contract

Insurance is a contract wherein an individual or entity gets financial protection from the insurance company for any damages or losses incurred. The individual or entity is called the insured, whereas the insurance company is called the insurer. The insured and the insurer enter a legal contract for a fixed term called the insurance term, and the contract is called an insurance policy.

Question

Don Draper has signed a contract that will pay him

$50,000 at the end of each year for the next

8 years, plus an additional

$150,000 at the end of year

8. If

7 percent is the appropriate discount rate, what is the present value of this contract?

Question content area bottom

Part 1

The present value of the contract is $

enter your response here

. (Round to the nearest cent.)

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Solution

VIEW

Step 3: Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

On January 1, 2019, Mopps Corp. agrees to provide Conklin Company 3 years of cleaning and janitorial services. The contract sets the price at 12,000 per year, which is the normal standalone price that Mopps charges. On December 31, 2020, Mopps and Conklin agree to modify the contract. Mopps reduces the fee for the third year to 10,000, and Conklin agrees to a 4-year extension that will extend services through December 31, 2024, at a price of 15,000 per year. At the time that the contract is modified, Mopps is charging other customers 13,500 for the cleaning and janitorial service. Required: Should Mopps and Conklin treat the modification as a separate contract? If so how should Mopps account for the contract modification on December 31, 2020? Support your opinion by discussing the application to this case of the factors that need to be considered for determining the accounting for contract modifications.
You are offered a $3,000,000 contract to be paid to you over 6 years at $500,000 per year. The first payment will be made at the end of the year. If the current market interest rate is 3.5%, what is the contract really worth to you? $2,500,000.00 $3,275,076.09 $2,664,276.51 $3,000,000.00
Suppose today you signed a contract for a special assignment over the next 6 years. You will be paid $11492 at the end of each year. If your required rate of return is 11%, what is this contract worth today? (Show your answer to the nearest cent. Round your answer to the nearest 2 decimal places. DO NOT round until after all calculations have been completed and you have reached your final answer.)
1. A contract calls for a lump-sum payment of $15,000. Find the present value of the contract assuming. When making these calculations, you need to use a present value factor that is carried to three decimal places to get the correct answers. a. The payment is due in five years, and the current interest rate is 9 percent. Your answer should contain a dollar sign.b. The payment is due in ten years and the current interest rate is 5 percent. Your answer should contain a dollar sign.c. Between the two calculations, A and B, which option is the best option for the person receiving the payment? State in a full sentence why you chose this option.
When deciding on a contract based on present value and a discount rate of 10%, what other factors must be considered? Contract 1 $900,000 signing bonus $850,000 at the end of each year for the next 5 years Contract 2 $200,000 immediate signing bonus $100,000 at the end of each year for the next five years $150,000 a year at the end of years 5 through 10 $1,000,000 a year at the end of years 11 through 40 Contract 3 $1,000,000 immediate signing bonus $500,000 at the end of year 1 $1,000,000 at the end of year 2 $1,500,000 at the end of year 3 $2,500,000 at the end of year 4 As part of the third offer he was also promised a $200,000 bonus for any year in which he was selected to play in the Pro Bowl All Star game. his agent figured there was a 25% probability of that occuring in each of the next 4 years.
if the discount rate was 7% isntead of 10% how might that change your answer in terms of which contract has the highest present value. you do not need to do both calculations, merely indicate what the likely impact would be. Contract 1 $900,000 signing bonus $850,000 at the end of each year for the next 5 years Contract 2 $200,000 immediate signing bonus $100,000 at the end of each year for the next five years $150,000 a year at the end of years 5 through 10 $1,000,000 a year at the end of years 11 through 40 Contract 3 $1,000,000 immediate signing bonus $500,000 at the end of year 1 $1,000,000 at the end of year 2 $1,500,000 at the end of year 3 $2,500,000 at the end of year 4 As part of the third offer hhe was also promised a $200,000 bonus for any year in which he was selected to play in the Pro Bowl All Star game. his agent figured there was a 25% probability of that occuring in each of the next 4 years. The Edmonton, Alberta, team of the canadian football team offered…
Show work and discuss result after Finding the approximate market value of a long position in an FRA at a fixed rate of 5 percent in which the contract expires in 20 days, the underlying is 180-day LIBOR, the notional principal is $25 million, the 20-day rate is 7 percent, and the 200-day rate is 8.5 percent
A contract can be fulfilled by making an immediate payment of $21,100 or equal payments at the end of every six months for 9 years. What is the size of the semi-annually payments at 10.6% compounded semi-annually? Question content area bottom Part 1 The payment is $enter your response here. (Round the final answer to the nearest cent as needed.
Suppose you are faced with several options of a signing contract. Which option would you choose? Assume 12% annual percentage rate (APR) with monthly compounding Option A: You will receive $20,000 every month from 1st month until 6th month No payment on the 7th month $30,000 every month from 8th month until 12th month Option B: you will receive a one-time payment at the end of year 1 of $280,000 Option C: you will receive $23,000 at the end of every month for 12 months Option D: you will receive $22,500 at the beginning of every month for 12 months Show how to solve using financial calculator please
Suppose you are faced with several options of a signing contract. Which option would you choose? Assume 12% annual percentage rate (APR) with monthly compounding Option A: You will receive $20,000 every month from 1st month until 6th month No payment on the 7th month $30,000 every month from 8th month until 12th month Option B: you will receive a one-time payment at the end of year 1 of $280,000 Option C: you will receive $23,000 at the end of every month for 12 months Option D: you will receive $22,500 at the beginning of every month for 12 months Solve using financial calculator
A contract will pay you $5000 per year every other year for the next 30 years. That is, since today is time 0, the contract will pay you $5000 in year 2, 4, 6. 28, 30. The discount rate is 8% compounded semiannually. What is the present value of this contract?
A contract requires end-of-month payments of $240 for another 9 1/4 years. What would an investor pay to purchase this contract if she requires a rate of return of 4.5% compounded monthly? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Investor would pay $