The Following Problem Requires Present Value Information

question 42

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 $600,000 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:

Social Entrepreneurship

A practice that aims at solving social problems or needs through innovative solutions while often pursuing sustainability and impact.

Philanthropists

Individuals or organizations that seek to promote the welfare of others, typically by donating money, time, or resources to charitable causes.

Grameen Bank

A microfinance organization and community development bank in Bangladesh that provides small loans to the impoverished without requiring collateral.

Bill Drayton

An American social entrepreneur known for popularizing the concept of "social entrepreneurship" and founding the organization Ashoka.