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Can you please evaluate the three offers in Time Value of Money formula and provide the value of each offer?
1- 1 mil now + 200k from year 6-15. If product sold over 100mil in sales after 15 yrs. an addition 3mil. Dr. Wolf believes there is a 70% probability this would happen.
2- 30% of buyer’s gross profit on the product for the next 4 years. The offeree’s gross profit margin is 60%. Sales in yr. 1 projected at 2mil. and to grow 40% per yr.
3- Trust Fund set up for next 8 yrs. proceeds to Dr. Wolf discounted back at 10%. Fund has semiannual payments for next 8 years of 200k (400k per yr.) Payments start immediately at beginning of each period as an annuity due. To look up the FV in tables add 1 to n (16+1) and subtract from value in table. Assume the annual interest rate on annuity is 10% annually (5% semiannually) determine the present value of the trust fund.
Find the present value of each of the three offers and indicate which one has the highest present value, please show your work.
Consider this a challenge to keep your brain in shape. You will be pleased with your own abilities.
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