Imagine you received two offers. You need to decide which one means more money for you!...

 

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Imagine you received two offers. You need to decide which one means more money for you! OFFER #1: Right away, you receive $2,460,000. Also, you will receive 40 back-to-back payments of $1,230,000 each, six months apart, and the first one of these will take place in one year. The discount rate is 10 percent, with daily compounding. OFFER #2: Right away, you receive $25 million. And nothing else in the future. To make your decision, you need to first figure out how much Offer # 1 is worth to you in today's dollars. The answer is: $ (Assume thirty days in each month and twelve months in each year.) (Do not round intermediate calculations. Round your final answer to 2 decimal places, e.g., 12.34.) Present value Imagine you received two offers. You need to decide which one means more money for you! OFFER #1: Right away, you receive $2,460,000. Also, you will receive 40 back-to-back payments of $1,230,000 each, six months apart, and the first one of these will take place in one year. The discount rate is 10 percent, with daily compounding. OFFER #2: Right away, you receive $25 million. And nothing else in the future. To make your decision, you need to first figure out how much Offer # 1 is worth to you in today's dollars. The answer is: $ (Assume thirty days in each month and twelve months in each year.) (Do not round intermediate calculations. Round your final answer to 2 decimal places, e.g., 12.34.) Present value

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To calculate the present value of Offer 1 we need to find the present value of the immediate payment ... View the full answer