Question: Exercise 5-5 (Algo) Present value; single amount (LO 5-3) The four actors below have just signed a contract to star in a dramatic movie about
Exercise 5-5 (Algo) 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 | $ 500,000 | 2 years |
| Isabel | 540,000 | 3 years |
| Meredith | 450,000 | Today |
| George | 400,000 | 1 year |
Required:
1-a. Assuming an annual discount rate of 10%, calculate the present value of the contract amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
|
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