A programmer is selling the rights of a new video game he has developed. Three companies have offered him contracts. 1. The first contract offers payments of $60,000 at the end of each year for the next 15 years. 2. The second contract offers $50,000 at the end of each year for 10 years, and then $90,000 per year for the following 5 years. 3. The third contract offers 15 payments, starting with $35,000 at the end of the first year, $40,000 at the end of the second, and so forth, increasing by $5,000 each year, i.e., the last payment (at the end of year 15) will be $35,000 + (14x$5,000)). Assume the genius uses a MARR of 10%. Based on the Present Worth, which offer should be selected?
A programmer is selling the rights of a new video game he has developed. Three companies have offered him contracts. 1. The first contract offers payments of $60,000 at the end of each year for the next 15 years. 2. The second contract offers $50,000 at the end of each year for 10 years, and then $90,000 per year for the following 5 years. 3. The third contract offers 15 payments, starting with $35,000 at the end of the first year, $40,000 at the end of the second, and so forth, increasing by $5,000 each year, i.e., the last payment (at the end of year 15) will be $35,000 + (14x$5,000)). Assume the genius uses a MARR of 10%. Based on the Present Worth, which offer should be selected?
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 19P
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Transcribed Image Text:A programmer is selling the rights of a new
video game he has developed. Three companies have offered him
contracts.
1. The first contract offers payments of $60,000 at the end of each
year for the next 15 years.
2. The second contract offers $50,000 at the end of each year for
10 years, and then $90,000 per year for the following 5 years.
3. The third contract offers 15 payments, starting with $35,000 at
the end of the first year, $40,000 at
the end of the second, and so forth, increasing by $5,000 each
year, i.e., the last payment (at the
end of year 15) will be $35,000 + (14x$5,000)).
Assume the genius uses a MARR of 10%. Based on the Present
Worth, which offer should be selected?
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