# Question: Answer the following questions Explain your answers a A contest

Answer the following questions. Explain your answers:

a. A contest advertises that the winner wins $1,000,000. The $1,000,000 prize is paid in equal instalments over 25 years, with the first payment being made one year from the date the contest winner is announced. What is the "real" (present) value of the prize? Assume a discount rate of 8 percent.

b. You have the option of receiving $2,000,000 today or $250,000 a year for 15 years, beginning one year from now. If your discount rate is 12 percent, which would you choose?

c. A store allows you to purchase a new computer for $200 down and $50 a month for 36 months. If the appropriate discount rate is 1 percent per month, what would be the equivalent cash price today for the computer?

d. You can purchase an investment that pays interest of $200 per year for ten years plus $2,500 in the tenth year. If your discount rate is 10 percent, what is the maximum amount you should pay for the investment? (When answering, remember that calculating an annuity only applies to equal payments. In this question, the present value of the additional $2,500 received in the tenth year must be determined separately.)

a. A contest advertises that the winner wins $1,000,000. The $1,000,000 prize is paid in equal instalments over 25 years, with the first payment being made one year from the date the contest winner is announced. What is the "real" (present) value of the prize? Assume a discount rate of 8 percent.

b. You have the option of receiving $2,000,000 today or $250,000 a year for 15 years, beginning one year from now. If your discount rate is 12 percent, which would you choose?

c. A store allows you to purchase a new computer for $200 down and $50 a month for 36 months. If the appropriate discount rate is 1 percent per month, what would be the equivalent cash price today for the computer?

d. You can purchase an investment that pays interest of $200 per year for ten years plus $2,500 in the tenth year. If your discount rate is 10 percent, what is the maximum amount you should pay for the investment? (When answering, remember that calculating an annuity only applies to equal payments. In this question, the present value of the additional $2,500 received in the tenth year must be determined separately.)

## Answer to relevant Questions

Use the tools introduced in this chapter to answer the following questions. You have to decide which tool to use in each case. Explain your conclusions. a. An investor purchases a $5,000 investment certificate that pays 8 ...Use the following information to calculate accounts receivable on July 31, 2018 and the amount of accounts receivable written off in 2018. Assume that all sales are oncredit:Trilby Inc. (Trilby) uses the percentage-of-credit-sales method for estimating its bad debt expense. The percentage that Trilby uses is based on historical information. Trilby's management hasn't revised the percentage for ...Use the following information about Sunnyside Ltd. to calculate the accounts receivable turnover ratio and the average collection period for 2016 and 2017. Explain what each numbermeans.Wooler Inc. operates a discount store in a medium-sized Canadian city. At the beginning of 2016, the owner decided to begin accepting major credit cards in the store. Until then, only cash had been accepted. The owner had ...Post your question