Present Value
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Dr Wolf received this offer for his latest discovery. Thirty percent of the buyer's gross profit on the product for the next four years. The buyer's gross profit margin was 60 percent. Sales in year one were projected to be $2 million and the expected to grow by 40 percent per year. Fine the present value of this offer. A 10 percent interest rate should be used.
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Present Value of the Offer-
Dr Wolf will be paid depending on the gross profits obtained by the sales of the product, so we need to calculate that first using the following formula:
Gross Profit = (Gross Profit Margin) x (Sales Revenue)
Now, we know that sales will be $2,000,000 during the first ...
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