Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement:

Question:

Assume that Sonic Foundry Corporation has a contractual debt outstanding. Sonic has available two means of settlement: It can either make immediate payment of $3,500,000, or it can make annual payments of $400,000 for 15 years, each payment due on the last day of the year.

Instructions

Which method of payment do you recommend, assuming an expected effective-interest rate of 8% during the future period?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...