Receiving much less media attention from the previous case, the newly chosen CFO of Retro Max (RM) was thrilled with the response received from drug companies for the latest discovery, a unique electronic stimulator that reduces the pain from arthritis. While the process had yet to pass Federal Drug Administration (FDA) testing and was in the mid-stages of development, excitement from the investment community extreme. RM received the three proposal described in the following paragraph. (Use a 10% interest rate throughout this analysis unless otherwise specified.)

Proposal I: $1,000,000 now plus $200,000 from year 6 through 15. Also if the product did over $100 million in cumulative sales by the end of year 15, RM would receive an additional $3,000,000. RM CFO thought there was a 70% probability this would happen.

Determine the present value of the trust fund's final value.

Required: Find the present value of each of the three offers and indicate which one has the highest present value. (Show and label all calculations.)

determine the present value of the trust fund's final value. Required: Find the present value of the offer (Show and label all calculations.)