Exercise $5-5($Static$)$ Present value; single amount $($LO $5-3)$

The four actors below have just signed a contract to star in a dramatic movie about relationships among hospital doctors. Filming is expected to take two years to complete. Each person signs independent contracts today with the following terms:

Contract Terms

Contract Amount Payment Date

Derek $ $600,0002$ years

Isabel $640,0003$ years

Meredith $500,000$ Today

George $500,0001$ year

Required:

$1-$a$.$ Assuming an annual discount rate of $9\%,$ calculate the present value of the contract amount. $($FV of $$1,$ PV of $$1,$ FVA of $$1,$ and PVA of $$1)$

$1-$b$.$ Which of the four actors is actually being paid the most? Assuming an annual discount rate of $9\%,$ calculate the present value of the contract amount.

Note: Use tables, Excel, or a financial calculator. Round your answers to $2$ decimal places.

Present Value

Derek

Isabel

Meredith

George Which of the four actors is actually being paid the most?

Which of the four actors is actually being paid the most?