You serve as legal counsel for a recently fired, former Director of the FBI. As part of
Question:
You serve as legal counsel for a recently fired, former Director of the FBI. As part of the ex-Director’s severance package, he has two choice. One option is for the US Government to pay your client $14,000/mo. each for 15 years (180 total monthly payments) with the first monthly payment occurring exactly four years from now. His other option is to receive monthly payments of $12,150 for 15 years (i.e., 180 payments) with the first payment occurring one month from today. The appropriate rate for valuing the cash flows is 3.60%/ year.
A speculator wants to purchase the rights to the Director’s retirement package today. The Director would rather receive a big chunk of cash today instead of this package that’s being offered by the US Government. The speculator and the ex-Director are in full agreement on all information provided here.
Calculate a fair price at which such an exchange could occur. please use excel.
Ethics in Accounting A Decision Making Approach
ISBN: 978-1118928332
1st edition
Authors: Gordon Klein