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I have a finance question for you: You received a $ 7 0 0 million contract for the next 1 0 years. You will be
I have a finance question for you:
You received a $ million contract for the next years. You will be paid $ million per year for the next years STARTING YEAR FROM TODAY and will then receive $ million per next for the next years. So that is total payments of $ million and total payment os $ million.
If the discount rate is what is the present value of earnings?
You are given an alternate deal to sign for $ million per year for the next years, STARTING YEAR FROM TODAY. If the discount rate is what is the present value of earnings?
As the discount rate increases, what happens to the difference in present value between the two contracts?
a Both contracts have a lower present value but the effect on contract # is larger so the differece in present values shrinks
b Both contracts become more valuable as the discount rate increases, but the value of contract # goes up faster than the value of contract #
c The difference in present value is roughly constant as the rate goes up
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