Purchased electrical services

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Reference no: EM13739850

A manufacturing company purchased electrical services for the next 5 years to be paid for with $70,000 now. The service after 5 years will be $15,000 per year beginning with the sixt year. After 2 years service, the company, having surplus profits, requested to pay for another 5 year service in advance. If the electrical company elected to accept payment in advance, what would each company set as a fair settlement to be paid if (a) the electrical company considered 15% compounded annually as a fair return, and (b) the manufacturing company considered 12% a fair return?

Reference no: EM13739850

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