Purchase Solution

Rate

Not what you're looking for?

Ask Custom Question

Ms. Ima Rich has just passed away. In her will she has left your not-for-profit organization $2 million dollars to be paid out in annual installments of $100,000 a year for the next twenty years.

The executive director of your organization wants the money now to purchase a new headquarters. You have been charged with finding a way to get the money sooner. You have contacted Farmers Insurance Company and they have agreed to advance $1.3 million in return for the annuity from Ima.

Your boss doesn't understand why they won't give you the full $2. How do you explain this to her? Are you getting a good deal from the insurance company? How can you tell?

Purchase this Solution

Solution Summary

The solution does a great job of explaining the question being asked. The answer is brief and concise and is very easy to understand for anyone looking for a basic understanding of this topic. Overall, an excellent response to the question being asked.

Solution Preview

They will not give you the full $2M because of time value of money. A dollar received right now is more valuable than a dollar received a year from now. This underlying concept explains why they will not give the entire $2M upfront. To Farmer's Insurance an annuity that gives 100,000 ...

Purchase this Solution


Free BrainMass Quizzes
Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.