HomeworkLib
Question

Westover Ridge has a management contract with its president that requires a lump sum payment of...

Westover Ridge has a management contract with its president that requires a lump sum payment of $15 million to be paid upon the completion of the president's first 5 years of service. The company can earn 6.5 percent on its investments and wants to set aside an equal amount of money each year over the next 5 years to fund this obligation. How much money must the firm save each year?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Future value of annuity=Annuity[(1+rate)^time period-1]/rate

15,000,000=Annuity[(1.065)^5-1]/0.065

15,000,000=Annuity*5.693640976

Annuity=15,000,000/5.693640976

which is equal to

=$2,634,518.06(Approx).

0 0
Add a comment
Know the answer?
Add Answer to:
Westover Ridge has a management contract with its president that requires a lump sum payment of...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Johnson Company has a management contract with its newly hired president. The contract requires a lump...

    Johnson Company has a management contract with its newly hired president. The contract requires a lump sum payment of $12 million be paid to the president upon the completion of his first five years of service. The company wants to set aside an equal amount of funds each year to cover this anticipated cash outflow. The company can earn 6% on these funds. How much must the company set aside each year for this purpose? $2,430,154 $2,372,198 $2,296,513 $2,128,757 $2,019,558

  • The Lexford Co. has a management contract with their newly hired president. The contract requires a...

    The Lexford Co. has a management contract with their newly hired president. The contract requires a lump sum payment of $12 million to be paid to the president upon the completion of her first three years of service. The company wants to set aside an equal amount of funds each year to cover this anticipated cash outflow. Lexford can earn 6% on these funds. How much must the company set aside each year for this purpose? Select one OA. $3,723,071.42...

  • Holiday Tours (HT) has an employment contract with its newly hired CEO. The contract requires a...

    Holiday Tours (HT) has an employment contract with its newly hired CEO. The contract requires a lump sum payment of $28 million be paid to the CEO upon the successful completion of her first three years of service. HT wants to set aside an equal amount of money at the end of each year to cover this anticipated cash outflow and will earn 6.5 percent on the funds. How much must HT set aside each year for this purpose? $2,472,882.51...

  • The Yankee's have a contract with their newly hired manager that requires a lump sum payment...

    The Yankee's have a contract with their newly hired manager that requires a lump sum payment of $25,000,000 be paid at the completion of her first 8 years. The Yankees want to set aside an equal amount of money each year to cover this anticipated cash outflow. If the Yankees can earn 7 percent on these funds, how much must they set aside at the end of each year? A. $2,363,593.24 B. $2,436,694.06 C. $1,931,435.03 D. $2,368,832.13 E. $1,750,000.00

  • The Nashville Geetars , a professional foosball team , has just signed its star player Harold...

    The Nashville Geetars , a professional foosball team , has just signed its star player Harold "The Wrist" Thornton to a new contract. One of the terms requires the team to make a lump sum payment of $13.31 million to the The Wrist exactly 10 years from today . The team plans to make equal annual deposits into an account that will earn 5.05 percent in order to fund the payment. How much must the team deposit each year?

  • The Nashville Geetars, a professional foosball team, has just signed its star player Harold "The Wrist" Thornton to a ne...

    The Nashville Geetars, a professional foosball team, has just signed its star player Harold "The Wrist" Thornton to a new contract. One of the terms requires the team to make a lump sum payment of $13.57 million to the The Wrist exactly 11 years from today. The team plans to make equal annual deposits into an account that will earn 5.44 percent in order to fund the payment. How much must the team deposit each year?

  • You estimate that you will owe $45,300 in student loans by the time you graduate. The...

    You estimate that you will owe $45,300 in student loans by the time you graduate. The interest rate is 4.25 percent. If you want to have this debt paid in full within ten years, how much must you pay each month? Your insurance agent is trying to sell you an annuity that costs $230,000 today. By buying this annuity, your agent promises that you will receive payments of $1,225 a month for the next 30 years. What is the rate...

  • The Nashville Geetars, a professional foosball team, has just signed its star player Harold "The Wrist...

    The Nashville Geetars, a professional foosball team, has just signed its star player Harold "The Wrist Thornton to a new contract. One of the terms requires the team to make a lump sum payment of $13.33 million to the The Wrist exactly 11 years from today. The team plans to make equal annual deposits into an account that will earn 5.08 percent in order to fund the payment. How much must the team deposit each year? $889,198.13 $1,211,818.18 O $161,533.39...

  • 1 to 10 Excel Hydro took a loan contract which requires a payment of $40 million...

    1 to 10 Excel Hydro took a loan contract which requires a payment of $40 million plus interest two years after the contract's date of issue. The interest rate on the $40 million face value is 9.6% compounded quarterly. Before the maturity date, the original lender sold the contract to a pension fund for $43 million. The sale price was based on a discount rate of 8.5% compounded semi-annually from the date of sale. Excel Hydro is also considering building...

  • The Nashville Geetars, a professional foosball team, has just signed its star player Harold "The Wrist"...

    The Nashville Geetars, a professional foosball team, has just signed its star player Harold "The Wrist" Thornton to a new contract. One of the terms requires the team to make a lump sum payment of $13.19 million to the The Wrist exactly 10 years from today. The team plans to make equal annual deposits into an account that will earn 4.87 percent in order to fund the payment. How much must the team deposit each year? You have just leased...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT