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Pastor Michael McAlister has been Senior Pastor for North Faith Church in Tyler, Texas for the past 2 5 years. His duties include conducting 3
Pastor Michael McAlister has been Senior Pastor for North Faith Church in Tyler, Texas for the past
years. His duties include conducting weekday services and weekend services. He also directs all
ministries at the church and manages all external services.
North Faith Church has approximately accounted members. Monthly donations are approximately
$ Total expenses for the church, excluding Pastor McAlisters annual salary of $ are
approximately $ These expenses include church maintenance, staff salary, building maintenance,
inventory, etc.
On May Pastor McAlister was returning from War Memorial Hospital where he spent over hours
conducting special services and prayer sessions for church patrons and community patients. As he
approached and attempted to merge on Interstate he failed to see the stopped traffic in front of him
and subsequently collided with another vehicle. The driver of the vehicle was yearold Joshua Boone,
a young lawyer and father of
After further investigation, it was revealed that Pastor McAlister was texting while driving and was
found negligent by the courts. The family of Joshua Boone presented proposals for Pastor McAlister.
Because Pastor McAlister was on work time during the accident, the church and Pastor McAlister have
privately decided to split all costs.
The following are the proposals:
Proposal Pay the family of Joshua Boone $ a year for the next years,
and $ a year for the remaining years.
Proposal Pay the family a lump sum payment of $ million today.
Proposal Pay the family of Joshua Boone a relatively small amount of $ a
year for the next years, but also guarantee them a final payment of
$ million at the end of years.
In order to analyze the present value of these three proposals, attorney Knox Hollister called on a
financial expert to do the analysis. You will aid in the process.
MGT : Principles of Finance Final Case Study
Required Questions Assuming a discount rate of percent is used, which of the three
proposals has the highest present value?
In analyzing the first proposal, take the present value of the
year $ annuity. Then, take the present value of
the deferred annuity of $ that will run from the st through the
th year. The answer you get for the second annuity will represent the
value at the beginning of the st year the same as the end of the th
year You will need to discount this lump sum value back for years as a
single amount to get its present value. You then add together the present
value of the first and second annuity.
The second and third proposals are straightforward and require no further
explanation.
Now, assume that a discount rate of percent is used instead of
percent. Which of the three proposals provides the highest present
value?
Explain why the change in outcome takes place between Question and
Question
If Knox Hollister thinks additional punitive damages are likely to be $
million in a jury trial, should he be more likely to settle outofcourt or go
before the jury?
Should Pastor Michael McAlister be fired by North Faith Church? Explain
your answer and provide evidence to support your opinion.
Do you agree or disagree that the church should be using donations and
insurance money to cover Pastor McAlisters costs? Explain your answer
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