The Following Problem Requires Some of the Following Present Value

question 89

Essay

The following problem requires some of the following present value information:
$\begin{array}{|l|l|}\hline \text { PV of an ordinary anduity for } 20 \text { periods at } 10 \% & 3.5136 \\\hline \text { PV of an ordinary anumity for } 19 \text { periods at } 10 \% & 3.3649 \\\hline \text { PV of an ordinary anumity for } 18 \text { periods at } 10 \% & 3.2014 \\\hline \text { PV of } 1 \text { for } 20 \text { periods at } 10 \% & 0.14864 \\\hline\end{array}$
Bioco sold a patent on a new laser process to Agent Co. The sales agreement which was signed on January 1, 2011 requires Agent Co. to pay Bioco $1 million immediately. In addition, Agent is required to pay $600,000 each December 31 for 20 years starting with December 31, 2011. Agent and Bioco estimate that 10 percent is an appropriate interest rate for this arrangement.
Required:
a. Compute the present value of the receivable on Bioco's books on January 1,2011 imme cliately after receiving the $\$ 1$ million down
payment.
b. Compute the present value of the receivable on Biotech's books on December 31, 2011.
C. Compute the present value of the re ceivable on Biotech's books on December 31,2012 .

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Definitions:

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A process involving the assessment of an individual's mental health by a psychiatrist, through interviews, physical exams, and possibly psychological testing, to diagnose and guide treatment for mental disorders.