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Calculate the present value of a single amount (LOC-2) The four actors below have just signed a contract to star in a dramatic movie about relationships among hospital doctors. Each person signs independent contracts with the following terms: Contract Terms Contract Amount Payment Date Derek $ 420,000 2 years Isabel 460,000 3 years Meredith 540,000 Today George 320,000 1 year Required: Assuming an annual discount rate of 10%, calculate the present value of the contract amount. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answers to 2 decimal places.)

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Answer:

Derek = $ 347,107.44

Isabel = $345,604.81

Meredith = $540,000 

George = $290,909.09

Explanation:

Present value is the sum of discounted cash flows.

Present value can be calculated using a financial calculator:

Derek:

Cash flow in year 1 = 0

Cash flow in year 2 = $ 420,000

I = 10%

Present value =$ 347,107.44

Isabel

Cash flow in year 1 and 2 = 0

Cash fkow in year 3 = 460,000

I = 10%

Present value = $345,604.81

George

Cash flow in year 1 = 320,000

I = 10%

Present value = $290,909.09

To find the NPV using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.

3. Press compute

I hope my answer helps you

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