You have hit it rich. Natural Gas has been discovered on the land that you inherited from your grandma in Southern Indiana. After tense negotiations between your lawyer and Evansville Gas Extraction Inc., you have agreed to receive an initial payment of $75,000 immediately, and then 12 years of weekly royalty payments (12 years * 52 weeks = 624 payments in total) of $250 from the Gas Company. Because it will take a little time to get the piping in place, the first of the 624 weekly royalty payments will be paid exactly 12 weeks from now. If the interest rate implicit in the agreement is 5.2% APR, compounded weekly.

What is the present value of the royalty agreement that you have made?

Answer rating: 100% (QA)

To find the present value of the royalty agreement we can use the f... View the full answer