The Following Problem Requires Present Value Information

question 44

Essay

The following problem requires present value information:
Biotech sold a patent on a new blood analyzer to Pharma.The sales agreement which was signed on January 1,2009 requires Pharma to pay Biotech $1 million immediately.In addition,Pharma is required to pay $700,000 each December 31 for 20 years starting with December 31,2009.Pharma and Biotech judge that a 10 percent is an appropriate interest rate for this arrangement.
a.Compute the present value of the receivable on Biotech's books on January 1,2009 immediately after receiving the $1 million down payment.
b.Compute the present value of the receivable on Biotech's books on December 31,2009.
c.Compute the present value of the receivable on Biotech's books on December 31,2010.

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Definitions:

Postmodern City

Urban areas characterized by a diversity of architectural styles, cultural pluralism, and a decentralized economic and social structure.

Privatization of Public Space

The process through which communal or publicly owned spaces are sold to private entities or managed in ways that prioritize private interests over public access.

Urban-Growth Machine

A theory suggesting urban development, and economic growth are driven by a coalition of interest groups who all benefit from continuous expansion.

Gentrification

The process by which higher income or social class groups enter and renovate urban neighborhoods, often leading to displacement of lower-income residents and changes in the area's character.