Chapter 4 Case Study.

The director of marketing or your organization asks for your advice regarding sponsorship deals she is contemplating. She has to choose from the following: a 15-year sponsorship paying $100,000 per year, a 15-year sponsorship initially paying $75,000 per year and increasing 5% each year, and 15-year sponsorship paying $45,000 per year but increasing 12% each year.

Determine the present value of each year's payment for each proposal, as well as the total present value of each proposal. For each proposal, compute two different outcomes, one with a discount rate of 5% and one with a discount rate of 10%.