Question 5: (10 Points) answer 2 questions!!!!!

1. A consultant at a top-tier firm has been signed to a three-year, $7 million contract. The details of the contract provide for an immediate cash bonus of $1 million. The consultant is to receive $1.5 million in salary at the end of the first year, $2 million at the end of the next year, and $2.5 million at the end of the last year. Assuming a 10% discount rate, how much is this compensation package worth at the time of the (signing of the) contract?

2. You have the opportunity to invest in a small business. The owner wants to borrow $185,000 from you for five years and the business is expected to make annual payments of $50,000 at the end of each year. Similar investment opportunities are expected to pay 5%. Is this a good investment? Explain.