**MULTIPLE PART QUESTION WHICH CHEGG ALLOWS***********

2.52 How much do you have to deposit now in your savings account that earns a 6% annual interest if you want to withdraw the annual payment series in the figure below? Figure P2.52 $2,000 $1,500 $1,750 $1,000 $1,250 0 2 3 5 5 P= ? 2.54 Suppose that an oil well is expected to produce 100,000 barrels of oil during its first year in production. However, its subsequent production (yield) is expected to decrease by 10% over the previous year's production. The oil well has a proven reserve of 1,000,000 barrels. a. Suppose that the price of oil is expected to be $60 per barrel for the next several years. What would be the present worth of the anticipated revenue stream at an interest rate of 12% com unded annually over the next seven years? b. Suppose that the price of oil is expected to start at $60 per barrel during the first year, but to increase at the rate of 5% over the previous year's price. What would be the present worth of the anticipated revenue stream at an interest rate of 12% compounded annually over the next seven years? c. Consider part (b) again. After three years' production, you decide to sell the oil well. What would be a fair price? 2.64 Consider the cash flow shown in the accompanying diagram. What value of C makes the inflow series equivalent to the outflow series at an interest rate of 10%? Figure P2.64 $500 $300 1 2, 3, 4, 5, 6, 7, 8, Years 1 1 1 2 2.74 You may have already won $2 million! Just peel the game piece off the Instant Winner Sweepstakes ticket, and mail it to us along with your order for subscriptions to your two favorite magazines. As a grand-prize winner, you may choose between a $1 million cash prize paid immediately or $100,000 per year for 20 years-that's $2 million! Suppose that, instead of receiving one lump sum of $1 million, you decide to accept the 20 annual installments of $100,000. If you are like most jackpot winners, you will be tempted to spend your winnings to improve your lifestyle during the first several years. Only after you get this type of spending out of your system will you save later sums for investment purposes. Suppose that you are considering the following two options. Option 1: You save your winnings for the first seven years and then spend every cent of the winnings in the remaining 13 years. Option 2: You do the reverse, spending for seven years and then saving for 13 years. If you can save winnings at 7% interest, how much would you have at the end of 20 years, and what interest rate on your savings will make these two options equivalent? 2.77 Giancarlo Stanton's $325 million mega-contract with Marlins was known to be the largest contract in sports history. The 13-year payout schedule looks like the following: 2015: $6.5 million 2016: $9 million 2017: $14.5 million 2018: $25 million 2019: $26 million 2020: $26 million 2021: $29 million 2022: $29 million 2023: $32 million 2024: $32 million 2025: $32 million 2026: $29 million 2027: $25 million plus $10 million buyout option. Note that the deal allows Stanton to opt out after the end of the 2020 World Series, but if he does, he leaves a substantial sum of money on the table by opting for free agency. In years 201520 he will earn $107 million of the $325 million deal, but in years 2021-26 where he would leave the Marlins, the salaries total $218 million would be foregone, or more than twice the sum of the early years in the contract. a. With the salary paid at the beginning of each season, what is the worth of his contract at an interest rate of 6%? b. Suppose he got another lucrative contract at the end of the 2020 season being a free agent valued at $210 million to be paid over 7 seasons ($30 million paid at the beginning of each season). Is it worth being a free agent to take this offer at 6% interest? 2.52 How much do you have to deposit now in your savings account that earns a 6% annual interest if you want to withdraw the annual payment series in the figure below? Figure P2.52 $2,000 $1,500 $1,750 $1,000 $1,250 0 2 3 5 5 P= ? 2.54 Suppose that an oil well is expected to produce 100,000 barrels of oil during its first year in production. However, its subsequent production (yield) is expected to decrease by 10% over the previous year's production. The oil well has a proven reserve of 1,000,000 barrels. a. Suppose that the price of oil is expected to be $60 per barrel for the next several years. What would be the present worth of the anticipated revenue stream at an interest rate of 12% com unded annually over the next seven years? b. Suppose that the price of oil is expected to start at $60 per barrel during the first year, but to increase at the rate of 5% over the previous year's price. What would be the present worth of the anticipated revenue stream at an interest rate of 12% compounded annually over the next seven years? c. Consider part (b) again. After three years' production, you decide to sell the oil well. What would be a fair price? 2.64 Consider the cash flow shown in the accompanying diagram. What value of C makes the inflow series equivalent to the outflow series at an interest rate of 10%? Figure P2.64 $500 $300 1 2, 3, 4, 5, 6, 7, 8, Years 1 1 1 2 2.74 You may have already won $2 million! Just peel the game piece off the Instant Winner Sweepstakes ticket, and mail it to us along with your order for subscriptions to your two favorite magazines. As a grand-prize winner, you may choose between a $1 million cash prize paid immediately or $100,000 per year for 20 years-that's $2 million! Suppose that, instead of receiving one lump sum of $1 million, you decide to accept the 20 annual installments of $100,000. If you are like most jackpot winners, you will be tempted to spend your winnings to improve your lifestyle during the first several years. Only after you get this type of spending out of your system will you save later sums for investment purposes. Suppose that you are considering the following two options. Option 1: You save your winnings for the first seven years and then spend every cent of the winnings in the remaining 13 years. Option 2: You do the reverse, spending for seven years and then saving for 13 years. If you can save winnings at 7% interest, how much would you have at the end of 20 years, and what interest rate on your savings will make these two options equivalent? 2.77 Giancarlo Stanton's $325 million mega-contract with Marlins was known to be the largest contract in sports history. The 13-year payout schedule looks like the following: 2015: $6.5 million 2016: $9 million 2017: $14.5 million 2018: $25 million 2019: $26 million 2020: $26 million 2021: $29 million 2022: $29 million 2023: $32 million 2024: $32 million 2025: $32 million 2026: $29 million 2027: $25 million plus $10 million buyout option. Note that the deal allows Stanton to opt out after the end of the 2020 World Series, but if he does, he leaves a substantial sum of money on the table by opting for free agency. In years 201520 he will earn $107 million of the $325 million deal, but in years 2021-26 where he would leave the Marlins, the salaries total $218 million would be foregone, or more than twice the sum of the early years in the contract. a. With the salary paid at the beginning of each season, what is the worth of his contract at an interest rate of 6%? b. Suppose he got another lucrative contract at the end of the 2020 season being a free agent valued at $210 million to be paid over 7 seasons ($30 million paid at the beginning of each season). Is it worth being a free agent to take this offer at 6% interest