Mr. Flint retired as president but is currently on a consulting contract for $45,000 per...
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Mr. Flint retired as president but is currently on a consulting contract for $45,000 per year for the next 10 years. a. If Mr. Flints opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract? b. Assuming that Mr. Flint will not retire for two more years and will not start to receive his 10 payments until the end of the third year, what would be the value of his deferred annuity? a, PV= 276,505.52 b. ???
**PLEASE EXPLAIN USING THE FORMULA, NOT CHARTS...CHARTS DO NOT HELP EXPLAIN HOW YOU GOT THE ANSWER. BY CHART I MEAN THIS:
Answer b
PV as per answer 'a'
276505.52
Year
2
Interest rate
10%
PVIF 10%, 2 year
0.8264
Value of deferred annuity
228504.16
(26505.52*0.8264)
Value of deferred annuity will be $ 228504.16
**HOW DID YOU GET 0.8264 ??? THANK YOU!!
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