Great Giant Plc Has a Management Contract with Its Newly

question 79

Multiple Choice

Great Giant plc has a management contract with its newly hired chief executive.The contract requires a lump sum payment of €25 million be paid to the chief executive upon the completion of her first ten years of service.The company wants to set aside an equal amount of funds each year to cover this anticipated cash outflow.The company can earn 6.5% on these funds.How much must the company set aside each year for this purpose?

• A)€1,775,042.93
• B)€1,798,346.17
• C)€1,801,033.67
• D)€1,852,617.25
• E)€1,938,018.22

---

Definitions:

Owner's Equity

The residual interest in the assets of a business after all liabilities are subtracted, representing ownership's claim on assets.

Expenses

Expenses are the outflows or the utilization of assets or incurring of liabilities during a period in the course of generating revenue.

Cash

A liquid asset representing currency or its equivalents that can be used immediately in transactions without any conversion or delay.

Services Rendered

The provision of work performed by one party for another in exchange for compensation.