Compute the present value of the receivable on

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Reference no: EM13614245

The following problem requires present value information:

Biotech sold a patent on a new blood analyzer to Pharma. Thesales agreement which was signed on January 1, 2006 requires Pharmato pay Biotech $1 million immediately. In addition, Pharma isrequired to pay $600,000 each December 31 for 20 years startingwith December 31, 2006. Pharma and Biotech judge that 10 percent isan appropriate interest rate for this arrangement.

1. Compute the present value of the receivable on Biotech'sbooks for January 1, 2006 immediately after receiving the $1million down payment.
2. Compute the present value of the receivable on Biotech'sbooks on December 31, 2006.
3. Compute the present value of the receivable on Biotech'sbooks on December 31, 2007.

Reference no: EM13614245

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