You have successfully started and operated a company for the past 10 years. You have decided that

Question:

You have successfully started and operated a company for the past 10 years. You have decided that it is time to sell your company and spend time on the beaches of Hawaii. A potential buyer is interested in your company, but he does not have the necessary capital to pay you a lump sum. Instead, he has offered $500,000 today and annuity payments for the balance. The first payment will be for $220,000 in three months. The payments will increase at 2.5 percent per quarter and a total of 25 quarterly payments will be made. If you require an EAR of 11 percent, how much are you being offered for your company?

Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...