Time Value of Money You have been hired as a financial advisor to Mr Sam. He has received two offers for playing for IPL and wants to select the best offer, based on consideration of money only. What will be your advice? (Hint: Compare the Present Value of each offer by assuming a range of interest, say 8% - 14%) Note: Please show the formula and calculation for the answer selected Offer: Offer A is a $10million offer for $2million a year for 5 years Offer B is a $11million offer of $1million a year for four years and $7million in year 5th Question 1. What is the difference between PV Value (Present Values) of offer A and B at 12%? $0.1 million $0.2 million $0.7 million $0.8 Million Question 2. At 8% interest rate what would be the PV (Present Value) for Offer A $8.1 Million $8.4 Million $8.3 Million $7.9 Million Question 3. At 10% interest rate what would be the PV (Present Value) for Offer B $7.5 Million $8.1 Million $8.9 Million $8.5 Million
Time Value of Money You have been hired as a financial advisor to Mr Sam. He has received two offers for playing for IPL and wants to select the best offer, based on consideration of money only. What will be your advice? (Hint: Compare the Present Value of each offer by assuming a range of interest, say 8% - 14%) Note: Please show the formula and calculation for the answer selected Offer: Offer A is a $10million offer for $2million a year for 5 years Offer B is a $11million offer of $1million a year for four years and $7million in year 5th Question 1. What is the difference between PV Value (Present Values) of offer A and B at 12%? $0.1 million $0.2 million $0.7 million $0.8 Million Question 2. At 8% interest rate what would be the PV (Present Value) for Offer A $8.1 Million $8.4 Million $8.3 Million $7.9 Million Question 3. At 10% interest rate what would be the PV (Present Value) for Offer B $7.5 Million $8.1 Million $8.9 Million $8.5 Million
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
You have been hired as a financial advisor to Mr Sam. He has received two offers for playing for IPL and wants to select the best offer, based on consideration of money only. What will be your advice? (Hint: Compare the Present Value of each offer by assuming a range of interest, say 8% - 14%)
Note: Please show the formula and calculation for the answer selected
Offer:
- Offer A is a $10million offer for $2million a year for 5 years
- Offer B is a $11million offer of $1million a year for four years and $7million in year 5th
Question 1. What is the difference between PV Value (Present Values) of offer A and B at 12%?
- $0.1 million
- $0.2 million
- $0.7 million
- $0.8 Million
Question 2. At 8% interest rate what would be the PV (Present Value) for Offer A
- $8.1 Million
- $8.4 Million
- $8.3 Million
- $7.9 Million
Question 3. At 10% interest rate what would be the PV (Present Value) for Offer B
- $7.5 Million
- $8.1 Million
- $8.9 Million
- $8.5 Million
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