Agreement to offer personal services

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Reference no: EM13859499

From by Engineering Economics class:

A person signs an agreement to offer personal services over a period of five years. The company that hires him, offered to pay him an advance of $30,000 for his professional services at the moment of signing the contract and five additional payments to be made at the end of each of the five years of the contract, for a total of six payments. The first of these five payments will be for $45,000 and each subsequent payment will be $20,000 higher than the previous payment (year). The person to be hired prefers that the six payments are made on those dates (one payment at the moment of signing the contract, and the other payments made at the end of each year, for the five years of contract) but that all payments be made for the same amount of money.

a) Determine the amount that each of those uniform payments (annuities) must be, considering an annual interest rate of 10%.

b) Determine the cumulative value of the six annual payments at the end of the third year as of the date of signing the contract.

Reference no: EM13859499

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